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Oil prices stabilize as US, China announce extension to tariff truce
AI Summary
- Oil prices stabilize as US and China extend tariff truce, easing fears of trade war escalation impacting oil consumption
- US President Donald Trump extends tariff truce with China until November 10, boosting hopes for agreement between world's two largest economies
- Potential downside risks for oil market include upcoming meeting between Trump and Russian President Vladimir Putin to discuss ending war in Ukraine, with threat of tougher sanctions on buyers of Russian oil such as China and India
Oil prices were largely steady on Tuesday after the US and China extended a pause on higher tariffs, easing fears that an escalation of their trade war would hurt oil consumption.
Brent crude futures fell 2 cents to $66.61 a barrel by 09:04 GMT, while US West Texas Intermediate crude futures slipped 10 cents, or 0.2%, to $63.86.
US President Donald Trump extended the tariff truce with China until November 10, preventing triple-digit tariffs on Chinese goods as American retailers prepare for the critical year-end holiday season.
The move boosted hopes for an agreement between the world’s two largest economies, avoiding an effective trade ban. Tariffs pose a risk to global economic growth, which could reduce fuel demand and pressure oil prices lower.
Oil also found support from fresh signs of weakness in the US labor market, reinforcing expectations that the Federal Reserve will cut interest rates in September, according to Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.
Investors are also awaiting US inflation data due later today, which could shape the Fed’s rate-setting path. Interest rate cuts typically stimulate economic activity and boost oil demand.
Potential downside risks for the oil market include the upcoming meeting between Trump and Russian President Vladimir Putin in Alaska on Friday to discuss ending the war in Ukraine.
The meeting comes as the US steps up pressure on Russia, threatening tougher sanctions on buyers of Russian oil such as China and India if no peace deal is reached.
Trump had set a deadline of last Friday for Russia to agree to peace in Ukraine or face secondary sanctions on its oil buyers, while also pressing India and China to reduce purchases of Russian crude.
In a note, Commerzbank said: “If Friday’s meeting results in progress toward a ceasefire or even a peace deal in Ukraine, Trump may suspend the secondary tariffs imposed on India last week before they take effect in two weeks. If not, we could see harsher sanctions on other buyers of Russian oil, such as China.”
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