Oil prices retreated on Monday, to shrinking gains last week, due to concerns about continued oversupply amid a drop in demand, while trade tensions between the United States and China may curb the economic recovery with the start of easing measures to contain the Corona virus.
Earlier in the session, US West Texas Intermediate crude futures fell to $ 18.10. By 0658 GMT, the price fell $ 1.01, or 5.1 percent, to $ 18.77 a barrel. Crude was up 17 percent last week.
Brent crude contracts fell 10 cents, or 0.4 percent, to $ 25.50 a barrel. Brent rose last week by about 23 percent after incurring losses for three consecutive weeks.
“As optimism about global growth outlook dissipates, oil is giving away gains (last week) and the strength of the US dollar is contributing,” said Michael McCarthy, chief market strategist at CMC Markets.
The dollar rose on Monday against a basket of currencies, and oil is usually priced in the US currency, whose strength raises the cost of crude to buyers in other currencies.
Markets were supported last week by signs of declining rates of coronavirus infection, while major oil producers, led by Saudi Arabia and Russia, are scheduled to start cutting production on May 1.
The largest US producers, Exxon Mobil and Chevron, said they would cut production by 400,000 bpd this quarter.
The reduction in production coincides with the easing of restrictions on activities in some American cities and around the world, which is expected to reduce global fuel glut and the pressure on storage tanks to contribute in pushing prices up.
But US President Donald Trump’s threat to consider increasing tariffs for China in response to the outbreak of the Coronavirus has renewed fears that trade tensions could hinder economic recovery and halt oil price gains.