Oil close to $70 a barrel as trade-war fears subside

London 

AMANDA COOPER

 Oil prices neared $70 a barrel on Tuesday, extending strong gains from the previous day as investors grew more optimistic that a trade dispute between the US and China may be resolved without greater damage to the global economy.

Brent crude futures were up 81c at $69.46 a barrel by 8.50am GMT, while US West Texas Intermediate (WTI) crude futures were at $64.31, up 89c. The futures market rallied more than 2% on Monday, reversing the previous session’s 2% decline.

On Tuesday, Chinese President Xi Jinping promised to open the country’s economy further and lower import tariffs, in a speech that struck a conciliatory tone on the trade tensions between China and the US.

Equities and industrial commodities rose, while perceived safe-havens such as gold and US treasuries came under pressure, reflecting confidence among traders and investors that a trade war is increasingly unlikely.

"It’s not so much ‘risk on/risk off’, as it is ‘trade war on/trade war off’ and, at the moment, we’re ‘trade-war off’," London Capital Group’s Jasper Lawler said. "There’s a lot of political motivation in the tariffs in the US, but ultimately, they won’t want a trade war, there is a general desire to boost the US economy."

Concerns of a prolonged trade dispute between the world’s two biggest economies and uncertainty over the supply and demand balance of global oil markets have made for volatile trading in the last few weeks.

Oil briefly rose above $70 two weeks ago, after Saudi Arabia vowed it would keep an agreement in place to limit supply into next year. But the US decision to impose tariffs on $50bn of Chinese goods a week later sent the price to a two-week low.

Oil markets have been supported by healthy demand and supply cuts led by oil cartel Opec. However, soaring US crude production, which has jumped by a quarter since mid-2016, threatens to undermine Opec’s efforts.

The American Petroleum Institute (API) will publish storage data later on Tuesday while the US Energy Information Administration (EIA) releases its monthly report on US production.

"Today’s monthly report from the EIA is likely to confirm that the supply situation is set to ease, primarily on the back of growing non-Opec production," Commerzbank said in a note. "It is doubtful whether this will pressure the price, however, as the most recent price drivers were for the most part not fundamental in nature."