Oil prices rose around 2 per cent on Friday, regaining ground after their biggest falls in years on US president Donald Trump’s threat to impose more tariffs on Chinese imports.
The move, due to take effect on September 1, would intensify a trade war between the world’s top two economies and crude consumers that has disrupted global supply chains and roiled financial markets.
Brent crude futures slumped more than 7 per cent on Thursday, their steepest drop in more than three years. US West Texas Intermediate (WTI) crude futures fell nearly 8 per cent to post their biggest drop in more than four years.
This ended a fragile rally built on steady drawdowns in US inventories even though global demand looked shaky due to the trade dispute.
Brent futures rose $1.60, or 2.64 per cent, to $62.10 a barrel by 1045 GMT on Friday. WTI futures gained $1.25, or 2.32 per cent, to $55.20 a barrel.
‘Given the latest turn in US-Sino trade relations, sustaining this uplift may be subject to how China chooses to respond to president Trump’s new tariff initiative’, Harry Tchilinguirian, global oil strategist at BNP Paribas in London, told the Reuters Global Oil Forum.
‘The rise in oil prices may be simply the result of a technical bounce back from an oversold close yesterday’.
Trump said on Thursday he would impose a 10 per cent tariff on $300 billion of Chinese imports and could raise tariffs further if China’s president Xi Jinping fails to move more quickly to strike a trade deal.
The announcement extends Trump’s tariffs to nearly all of China’s imports into the United States.
China warned it would not accept any ‘intimidation or blackmail’ and pledged countermeasures should the tariffs go into effect.
The US economy expanded by 2.1 per cent in the second quarter, government data showed on July 26, which beat economists’ expectations, though it was lower than first quarter growth.
Still, there are some signs of the economic toll of the trade dispute between the United States and China, which this week reported slowing manufacturing activity in July.
US manufacturing activity also slipped last month, dropping to a near three-year low, and construction spending fell in June as investment in private construction projects tumbled to its lowest level in 1-1/2 years, data showed on Thursday.