Oil edged higher as investors weighed an escalating US-China trade war that’s jeopardising the demand outlook against the risk that geopolitical tension in the Middle East will disrupt crude flows.
Futures in New York rose as much as 0.4 per cent after closing down 1 per cent on Monday. The US released a list of about $300 billion of Chinese goods that it’s threatened to hit with a 25 per cent tariff after Beijing announced retaliatory levies on about $60bn of US imports. Volatility in oil prices has jumped this month as crude is buffeted by the spectre of a full-blown trade war on the demand side, while escalating political rhetoric in the Middle East and production disruptions from Norway to Nigeria throws the spotlight on the supply outlook, according to Bloomberg. US drilling activity and a pending decision by Opec and its allies on whether output curbs will be extended beyond June are taking a back seat to the various crises.
“Investors are focusing on the US-China trade tensions, as well as the geopolitical risks in the Arabian Gulf, rather than the fundamentals,” said Kim Kwangrae, a commodity analyst at Samsung Futures in Seoul. “Unless there is some kind of conclusion on those issues, prices will continue to fluctuate.”
West Texas Intermediate crude for June delivery rose 19 cents, or 0.3 per cent, to $61.23 a barrel on the New York Mercantile Exchange at 12:22pm in Singapore after falling as much as 0.5 per cent earlier. The contract closed 62 cents lower at $61.04 on Monday.
Brent for July settlement added 24 cents, or 0.3 per cent, to $70.47 a barrel on the London-based ICE Futures Europe exchange after losing as much as 0.4 per cent earlier. The global benchmark contract is trading at a $9.06 premium to WTI.
But analysts said the US-China trade war continues to cast a pall on the market as a whole, according to Reuters.
“This ramp-up in trade tensions, which I don’t really think people saw coming, is going to have an impact, a broad impact,” Phin Ziebell, senior economist at National Australia Bank said by phone. “You can’t avoid the impact on the oil market.”
Meanwhile, President Donald Trump said he’ll meet Chinese President Xi at a G20 summit in Japan in late June.
Asian stocks fell Tuesday, although not as much as the drop in US equities on Monday. Commodities including copper and soya beans recovered some of their recent losses.
The Andrea Victory oil tanker got a hole in its hull after being struck by an unknown object while at an anchorage at Fujairah in the UAE, according to Thome Shipmanagement, which manages the carrier. That comes after Saudi Arabia said two of its vessels were damaged in a “sabotage” incident while approaching the Strait of Hormuz, the state-run Saudi Press Agency reported.
Source The National