Oil steadies after selloff on concerns of U.S.-China trade clash

Oil recovered slightly after Monday’s selloff, but remained near a two-week low on concerns about an escalating trade war between China and the U.S.

 

Futures added 0.7 percent in New York after losing 3 percent on Monday. China imposed retaliatory tariffs on U.S. goods valued at about $3 billion, the latest move in a trade dispute between the world’s largest economies that’s spurring investors to shy away from riskier assets. Meanwhile, American crude stockpiles are forecast to have risen for the fifth time in six weeks.

Oil rebounded over 5 percent last month on the increasing risk that the U.S. could quit the nuclear deal with OPEC producer Iran. Yet investors worry that President Donald Trump’s other great geopolitical risk — protectionist trade policies that could lead to further reciprocal tariffs by China — will undermine global economic growth. The rapid increase in American crude production — which has topped 10 million barrels a day for eight straight weeks — has also placed a lid on prices.

“Financial markets have gone through a risk-off period, meaning that risky assets are sold,” said Michael Poulsen, an analyst at Global Risk Management Ltd. “Looking at the oil fundamentals, U.S. production is still on the rise.” West Texas Intermediate for May delivery was at $63.45 a barrel on the New York Mercantile Exchange, up 44 cents, at 9:25 a.m. in London. The contract fell $1.93 to $63.01 on Monday, the most since Feb. 9. Total volume traded was about 32 percent below the 100-day average.

Brent for June settlement added 53 cents to $68.17 on the London-based ICE Futures Europe exchange. Prices dropped 2.5 percent, or $1.70, to $67.64 on Monday. The global benchmark crude traded at a $4.73 premium to June WTI. Yuan-denominated oil futures on the Shanghai International Energy Exchange lost 2.8 percent to 405.5 yuan a barrel. The September delivery contract closed 0.9 percent lower on Monday after debuting last week.

U.S. crude inventories are estimated to have added 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data due Wednesday. The nation’s oil production had also increased for a fifth week in the period ended March 23, hitting a fresh record.

Oil-market news:

  • Gasoline futures added 0.7 percent to $1.9807 a gallon, after falling 2.6 percent Monday.
  • Russia is committed to ensuring a re-balancing of the global oil market, Energy Minister Alexander Novak said Monday in a statement.

Sources and photo-credits: Bloomberg with assistance by Tsuyoshi Inajima