Oil prices were edging up early on Tuesday, trying to shake off several hefty sell-offs in recent days after U.S. President Donald Trump abruptly ended a tentative trade war truce at the end of last week.
As of 08:45 EDT a.m. on Tuesday, WTI Crude was up 0.66 percent at $55.05, and Brent Crude was trading up 0.48 percent at $60.10.
Brent Crude prices recovered early on Tuesday to slightly above $60 a barrel, after dipping below that psychological threshold on Monday on the back of heavy stock and oil market sell-offs amid fears that the renewed U.S.-China trade war would take a toll on global economy and oil demand growth.
On Thursday last week, oil prices took a heavy hit after U.S. President Donald Trump said that the U.S.-China trade talks would continue in September, while the “U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country.”
Oil prices recovered on Friday as Baker Hughes reported another decline in the U.S. oil and gas rig count, but they dipped again on Monday after the U.S. and China escalated the trade war.
On Monday, China let its currency, the yuan, drop to a decade-low and reportedly told its state companies to suspend imports of agricultural products from the United States in response to last week’s tariff threat.
Related: Oil Industry Faces Imminent Talent Crisis.
Early on Tuesday, oil prices held up but were still below the levels seen before August 1, when trade war-related fears started to weigh heavily, again, on global oil and equity markets.
The discount of WTI Crude to Brent Crude continues to shrink and is now at around $5.30 a barrel, down from a little over a $7/barrel discount at the end of July, and a recent low of more than a $11/barrel spread at the end of May, ING’s Head of Commodities Strategy, Warren Patterson, and senior commodity strategist Wenyu Yao wrote on Tuesday.
“The relative strength of WTI to Brent does suggest that US oil exports could come under pressure moving forward,” ING’s strategists said.
The next immediate catalyst for oil prices could be today’s API report on U.S. oil inventories, with a Bloomberg survey expecting that U.S. crude oil inventories dropped by 3 million barrels last week, ING says.
By Dominic C. Odoh
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