Crude oil jumped the most this year as the trade deadlock between the world’s biggest economies showed signs of easing, calming fears that global economic growth would be endangered.
Futures surged 4.7% in London on Tuesday, settling above $61 a barrel for the first time in more than a week. Optimism swept across financial markets after the US postponed tariffs on some Chinese goods and the Asian powerhouse said the two sides will hold new talks in two weeks. New York-traded crude climbed 4%.
“Some of the pessimism about oil demand and the trade war is being washed out of the market by these announcements,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Prices surrendered some of the gains later in the day after the American Petroleum Institute was said to find that US crude supplies grew by 3.7 million barrels last week. If confirmed by government data on Wednesday, it would be the second straight surprise increase during a time when summer travel typically drains petroleum stocks.
While Brent has gained the last three days, it’s still down about 6% this month. Saudi Arabia’s pledge to curb exports in a matter of weeks hasn’t been sufficient to offset booming production from American shale fields and lingering fears about demand growth.
“We still have an undecided oil market,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “That may be surprising, given the renewed verbal intervention from oil producers increasingly frustrated to see that their medicine - production cuts - isn’t having the desired effect.”
In the US, West Texas Intermediate crude for September delivery rose $2.17 to settle at $57.10 a barrel on the New York Mercantile Exchange. Brent for October settlement rose $2.73 to $61.30 on the ICE Futures Europe Exchange for the biggest one-day gain since December.
US crude retreated to $56.73 a barrel and Brent was at $60.92 at 4:55 p.m. after the stockpiles report.
The US will postpone until mid-December a 10% tariff on Chinese products on many holiday-shopping lists, including mobile phones and toys, President Donald Trump said. China said top officials from the countries spoke by telephone on Tuesday and will resume discussions in two weeks.
Expectations of declining US crude supplies have also driven bullish sentiment. Inventories probably dropped by about 2.5 million barrels last week, according to the median estimate in a Bloomberg survey before Energy Information Administration data due Wednesday.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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