Oil edges higher as trade war weighed against threats to supply
NEW DELHI: Oil edged higher as investors weighed an escalating U.S.-China trade war that’s jeopardizing the demand outlook against the risk that geopolitical tension in the Middle East will disrupt crude flows.
Futures in New York rose as much as 0.4% after closing down 1% on Monday. The U.S. released a list of about $300 billion of Chinese goods that it’s threatened to hit with a 25% tariff after Beijing announced retaliatory levies on about $60 billion of U.S. imports. Another oil tanker was damaged while anchored in the United Arab Emirates, following a spate of attacks on crude carriers on Sunday, adding to an already tense situation in the Persian Gulf.
Volatility in oil prices has jumped this month as crude is buffeted by the specter of a full-blown trade war on the demand side, while a combustible Middle East and production disruptions from Norway to Nigeria throw the supply outlook into doubt. U.S. drilling activity and a pending decision by the Organization of Petroleum Exporting Countries and its allies on whether output curbs will be extended beyond June are taking a back seat to the various crises.
“Investors are focusing on the U.S.-China trade tensions, as well as the geopolitical risks in the Gulf, rather than the fundamentals," said Kim Kwangrae, a commodity analyst at Samsung Futures Inc. in Seoul. “Unless there is some kind of conclusion on those issues, prices will continue to fluctuate."
West Texas Intermediate crude for June delivery rose 19 cents, or 0.3%, to $61.23 a barrel on the New York Mercantile Exchange at 12:22 p.m. in Singapore after falling as much as 0.5% earlier. The contract closed 62 cents lower at $61.04 on Monday.
Brent for July settlement added 24 cents, or 0.3%, to $70.47 a barrel on the London-based ICE Futures Europe exchange after losing as much as 0.4% earlier. The global benchmark contract is trading at a $9.06 premium to WTI.
The U.S. Trade Representative’s office released a list of about $300 billion worth of Chinese goods including children’s clothing, toys, mobile phones and laptops on Monday that the White House has threatened to hit with a 25% tariff. Meanwhile, President Trump said he’ll meet Chinese President Xi at a G-20 summit in Japan in late June.
Asian stocks fell Tuesday, although not as much as the drop in U.S. equities on Monday. Commodities including copper and soybeans recovered some of their recent losses.
The Andrea Victory oil tanker got a hole in its hull after being struck by an unknown object while at an anchorage at Fujairah in the U.A.E., according to Thome Shipmanagement, which manages the carrier. That comes after Saudi Arabia said two of its vessels were damaged in a “sabotage attack" while approaching the Strait of Hormuz, the state-run Saudi Press Agency reported.