Oil Prices Rise As Concerns Over Trade War Ease Up

Oil prices jumped up for a second consecutive day on Tuesday on hopes that the current dispute between the United States and China will be resolved and will not have any damage on the global economy.

Brent crude futures rose above $69 per barrel, 0.6 percent higher, up 39 cents from the last close. US West Texas Intermediate crude futures reached $63.81 per barrel, also 0.6 percent higher, up 39 cents from their previous close.

Prices stayed within the latest ranges amid the oil markets’ struggle with oversupply, which pressures producers to have competitive prices for them not to lose market shares.

These price gains came after Monday’s 2 percent rally during both European and American trading hours. However, that rally was a rebound from the 2-percent decline last Friday.

Chinese President Xi Jinping said that China’s economy will be more open and will impose lower import tariffs. His speech hinted at a possible reconciliation over the brewing trade tensions between China and the United States, which are two of the world’s biggest oil consumers.

The gains the in the oil prices come “amid easing apprehensions of a trade war between the United States and China,” said Sukrit Vijayakar, who is the director of Trifecta, an energy consultancy.

Recent trading sessions have been very volatile due to the lurking concerns for a prolonged trade dispute between the two countries. The uncertainty over the supply and demand balance of the world’s oil markets has also contributed to this volatility.

Aside from the trade spat, oil markets are also worried about the possibility of renewed US sanctions against a number of significant oil producers.

 “There has been a significant change in the Trump administration that has raised risks of potential sanction on key oil exporting countries including Iran, Venezuela, and Russia,” said US Bank JPMorgan.

Meanwhile, traders said that the weekly fuel inventory data would give them more market guidance. The American Petroleum Institute will release the storage data while the official data from the US Energy Information Administration will be published on Wednesday.

Oil market received some support from the healthy demand and supply cuts that were headed by the Organization of the Petroleum Exporting Countries (OPEC).

On the flip side, skyrocketing US crude production has jumped by a quarter since the middle part of 2016 to 10.46 million barrels per day. Such production at such pace threatens to cancel out OPEC’s efforts to end a supply glut and spur prices.

Late last year, the United States took from Saudi Arabia the title of the world’s second-biggest crude producer. Meanwhile, Russia pumps more crude than the US at nearly 11 million barrels per day.

China’s Sinopec and a number of other Asian refiners plan to cut Saudi crude imports next month rather than buying from alternative sources. This comes after Saudi Aramco reached higher-than-expected official prices.

According to JPMorgan, it expects Brent and WTI prices to have an average $69.50 and $65.20 per barrel this year, respectively. It predicts $64 per barrel for Brent and $58.50 per barrel for WTI next year.

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