Oil prices edged higher Tuesday, recovering a small portion of recent losses as traders remained on edge over slowing demand amid a rapidly escalating U.S.-led trade war.
At 07:55 ET (11:55 GMT), Brent oil futures expiring in June rose 0.3% to $64.43 a barrel, while West Texas Intermediate crude futures gained 0.4% to $60.94 a barrel.
Despite Tuesday’s small gains, oil prices remain near four-year lows with a particular point of concern being the growing trade tensions between the U.S. and China.
U.S. President Donald Trump on Monday threatened to impose an additional 50% tariffs on China if Beijing did not reverse its recent retaliatory measures.
But Beijing decried this threat, warning of a further escalation in the trade conflict if Trump did not back off.
The “risks are still skewed to the downside as President Trump threatens an additional 50% tariff on Chinese goods if it doesn’t lift its 34% retaliatory tariff by Tuesday,” said analysts at ING, in a note.
“It’s unlikely that China will reverse the policy. As such, we’re likely to see further escalation, which will only exacerbate growth concerns and worries over oil demand.”
China is the world’s biggest oil importer, although crude demand in the country has steadily declined in recent years on persistent economic weakness. Trump’s tariffs could potentially escalate this trend.
Elsewhere, the European Union has proposed counter-tariffs of 25% on a range of U.S. goods in response to U.S. tariffs on steel and aluminium.
The crude market has also struggled of late from the news that the Organization of Petroleum Exporting Countries and allies, known as OPEC+, surprised with an announcement last week that it would increase supply in May by more than expected.
“If downward pressure continues, the OPEC+ move could be very short-lived. We could see OPEC+ pause or even reverse supply increases. The Saudis need around US$90/bbl to balance their budget. While their supply increase last week suggests they’re not aiming for this level, the Saudis probably don’t want to see an even wider gap between their fiscal breakeven level and current prices,” said ING.
Weekly inventory data is due from the American Petroleum Institute industry group later on Tuesday and official data from the Energy Information Administration is due on Wednesday.
A preliminary Reuters poll showed on Monday that U.S. crude oil and distillate inventories were expected to have risen last week by about 1.6 million barrels, indicating market expectations of weak demand.
(Ambar Warrick contributed to his article.)
