Oil prices continue to fall further amid rising US-China tensions

Oil continues to trade lower as the week draws to a close, with prices unlikely to break $40 a barrel in 2020 amid rising US-China tensions.

Oil clawed back some of its early losses on Friday morning, with prices unlikely to tick above $40 a barrel, according to market analysts.

In a recent survey by Reuters, analysts’ consensus data showed that Brent crude and the US benchmark West Texas Intermediate (WTI) would average at $37.58 and $32.78 a barrel this year.

Investors were hoping that production cuts from OPEC+ and the US would help lift prices amid weakening global demand due to the Covid-19 crisis. But analysts remain weary about the economic fallout from rising tensions between the US and China.

The world’s two largest economies have seen relations sour over China’s new security laws on Hong Kong, which has put a stop to a recent recovery in equities and oil prices.

WTI remains in tight range

Over the past week the WTI price has continued to move sideways, dropping down to $31.50 before rebounding towards $35, according to Chris Beauchamp, chief analyst at IG.

‘So far this range shows no signs of ending. A move through $35 marks the continuation of the rally from the April lows, while a push below $31.50 opens the way to more downside, towards previous resistance at $27.60 in the first instance,’ he added.

Stocks recovery runs out of steam

Global equities ran out of steam on Friday, as investors grow increasingly concerned about rising tensions between officials in Washington and Beijing.

The FTSE 100 looked like it would end the week on a high note, only to sees its earlier gains almost entirely eroded on Friday, with the blue-chip index closing 2% lower and only marginally higher to where it kicked off the week.

European socks also took a tumble, with the Euro Stoxx 50 closing 1.35% lower – though the index managed to rally to a 4% gain overall this week.

Meanwhile the S&P 500 also opened lower, with the index likely to end the week in positive territory despite the shift in investor sentiment.

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