US crude erases gains as Chinese economy contracts

Singapore: US crude erased early gains to trade lower in Asia on Friday as China's first economic contraction in decades eclipsed President Donald Trump's plans to reopen the coronavirus-battered US economy.

US benchmark West Texas Intermediate was up in the morning session after Trump laid out his plan to restart the world's biggest economy.

But after the news that China's economy shrank 6.8 per cent in the March quarter from the previous year after authorities imposed drastic measures to contain the virus, the contract was down 0.75 per cent to USD 19.72 a barrel in the afternoon.

Brent crude, the international benchmark, was up 2.16 per cent at USD 28.42 a barrel, paring stronger gains in the morning session.

"The poor data from China appears to be having the more outsized effect on prices this morning," OANDA senior market analyst Jeffrey Halley told AFP.

"WTI has eased as poor retail sales in particular suggest that China's domestic-led economic recovery remains elusive."

But Asian stock markets posted gains because the GDP numbers were not as bad as some as feared, despite signalling the first negative growth since the world's second-largest economy began logging quarterly data in the early 1990s.

The virus first emerged in China late last year before marching round the globe.

Oil rices have tanked to 18-year lows as the virus outbreak triggers worldwide lockdowns and travel restrictions which have throttled demand, while a Saudi-Russian price war compounded the crisis.

Riyadh, kingpin of exporting group OPEC, and non-OPEC member Moscow ended their dispute last weekend when they led a group of top producers in striking a deal to cut output by nearly 10 million barrels a day to boost battered markets.

But prices have fallen even further since, with analysts saying the agreement will not be enough to make up for the loss of demand caused by the virus.

The International Energy Agency said this week that 2020 was likely to be "the worst year in the history" of the sector, while OPEC warned Thursday that oil markets were undergoing a "historic shock".

PTI