Oil prices rise due to the tariff truce between the US and China
12 August 09:31
Oil prices climbed on Tuesday after the US and China extended a pause in their tariff hikes. This eased concerns about a possible escalation of the trade war between the world’s two largest oil consumers, "Komersant Ukrainian" reports citing Reuters.
Brent futures rose 27 cents, or 0.4%, to reach $66.90 per barrel as of 07:40 Kyiv time. US West Texas Intermediate futures rose 24 cents, or 0.4%, to $64.20.
US President Donald Trump has extended the tariff truce with China for another 90 days, a White House official said on Monday. This decision postponed the introduction of triple tariffs on Chinese goods ahead of the critical end-of-year holiday season for US retailers.
The news raised hopes that an agreement between the world’s two largest economies could be reached and an actual trade embargo avoided. The duties pose a risk of a slowdown in global growth, which could reduce demand for fuel and put pressure on oil prices.
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Factors supporting oil prices
The rise in oil prices is also supported by new signs of weakness in the US labor market, which has increased expectations for a Federal Reserve interest rate cut in September, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.
Traders are also awaiting inflation data in the US today, which could affect the Fed’s interest rate policy. Lower interest rates usually stimulate economic activity and demand for oil.
Geopolitical risks and prospects for peace
A potentially negative factor for the oil market could be the meeting between Trump and Putin scheduled for Friday to discuss the end of the war in Ukraine.
“The US-Russia diplomatic track on the Ukrainian conflict remains an unpredictable factor as traders monitor any geopolitical surprises that could disrupt supply routes or sanctions regimes,”
– sachdeva said.
The meeting comes as the US is stepping up pressure on Russia with threats of harsher penalties for Russian oil buyers such as China and India if a peace deal is not reached.
“Any peace deal between Russia and Ukraine would end the risk of disruption to Russian oil supplies that has been hanging over the market,”
– daniel Hines, senior commodities strategist at ANZ, wrote in a note.
Trump has set a deadline of last Friday for Russia to agree to peace in Ukraine, otherwise buyers of Russian oil will face secondary sanctions. It is likely that the US president considered the agreement to meet with Putin as such an agreement, as no sanctions were imposed.
Meanwhile, the US is putting pressure on India and China to reduce purchases of Russian oil by threatening secondary tariffs.
The risk of these sanctions decreased on the eve of the meeting between Trump and Putin on August 15.
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