Oil prices steadied today but remained near four-year lows as a recovery in equity markets was outweighed by recession fears exacerbated by trade conflict between the US and China, the world’s two biggest economies.
Brent futures were up 33 cents, or 0.5%, at $64.54 a barrel this afternoon. US West Texas Intermediate crude futures rose 41 cents, or 0.7%, to $61.11.
The two benchmarks had slumped by 14% and 15% respectively yesterday after US President Donald Trump’s April 2 announcement of “reciprocal tariffs” on all imports.
Beijing vowed today not to bow to what it called US “blackmail” after Trump threatened an additional 50% tariff on Chinese goods if the country did not lift its 34% retaliatory tariff.
China’s commerce ministry said the country “will fight to the end”, ratcheting up fears over the global economy.
“Given this increasingly hostile tone, the risk of recession continues to rise, which in turn dims the outlook for global oil demand,” said SEB analyst Ole Hvalbye.
Meanwhile, the European Union has proposed counter-tariffs of 25% on a range of US goods in response to US tariffs on steel and aluminium.
Oil prices rose 1% in early trade, which ING’s Warren Patterson described as a relief rally aided by steadier equity markets.
“The market has sold off heavily in recent days as it starts to price in a significant demand hit. However, how much of a demand hit we (will) see is still very unclear,” he said.
President Trump also made a surprise announcement yesterday that the US and Iran were set to begin direct talks on Tehran’s nuclear programme, but Iran’s foreign minister said the discussions would be indirect.
“The talks could indeed mark the beginning of the end-game phase in the nuclear drama, in which success could lead to more barrels (of oil) on the market, and failure could trigger a military confrontation,” said RBC Capital Markets analyst Helima Croft.
A preliminary Reuters poll showed today that US crude oil and distillate inventories were expected to have risen last week by about 1.6 million barrels, indicating market expectations of weak demand.
