Oil prices rose more than 4% on Wednesday, rebounding from four-year lows hit earlier in the session, after U.S. President Donald Trump said he would continue to raise tariffs on China but halt the ones he announced last week for most other countries.
Trump authorized a 90-day halt and raised tariffs on China to 125%, effective immediately. The previously announced 104% tariffs on China went into effect on Wednesday.
Brent crude futures settled up $2.66, or 4.23%, at $65.48 a barrel. U.S. West Texas Intermediate crude futures settled up $2.77, or 4.65%, at $62.35.
Both contracts had fallen about 7% earlier in the session before the reversal. "We've reached a turning point in the trade conflict with Trump that gives countries that have shown a willingness to work on a deal to get rid of tariffs time to get it done," said Phil Flynn, senior analyst at Price Futures Group.
"What Trump has done is put China on an economic island by itself," Flynn said.
China announced additional tariffs on U.S. goods, imposing 84% tariffs on U.S. goods starting Thursday.
"I think the market is expecting a China deal to happen," said Bob Yawger, director of energy futures at Mizuho. "We seem to be making inroads into some of the countries that China has been hoping to rely on."
Still, the escalating trade war between China and the U.S. continues to weigh on oil prices, analysts said.
The trade conflict has stoked fears of a global recession, said UBS analyst Giovanni Staunovo. "While oil demand is unlikely to decline, the growing concern that oil demand will weaken over the next few months is calling for lower prices to trigger a supply adjustment to prevent the market from becoming oversupplied," Staunovo added.
The measures in Canada, a major U.S. trading partner, also took effect on Wednesday. European Union nations agreed on Wednesday to impose 25% tariffs on a range of U.S. imports in a first round of countermeasures.
Last week's decision by the OPEC+ producer group to raise output in May by 411,000 barrels per day, which analysts said would likely push the market into surplus, capped oil's gains.
In the U.S., crude inventories rose by 2.6 million barrels to 442.3 million barrels last week, the Energy Information Administration said, compared with analysts' expectations in a Reuters poll for a 1.4 million-barrel increase. "Exports are at lower levels and we have to see if we're going to lose access to the Chinese market, and if we're going to see a downturn in exports going forward," said John Kilduff, a partner at Again Capital in New York. The operator of the Keystone oil pipeline system in Canada and the United States issued a force majeure notice on Wednesday after a leak in North Dakota, according to media reports. (Newsmaker23)
Source: Reuters
