Oil Prices Rise As Extended US-China Tariff Pause Fuels Trade Optimism

The extension has bolstered hopes that Washington and Beijing could find common ground on a broader trade agreement, potentially avoiding a near standstill in bilateral trade.

Investors are also awaiting US inflation figures due later in the day, which could influence expectations on the Federal Reserve’s next interest rate move.

Source : Freepik

Oil prices moved higher on Tuesday after the United States and China agreed to extend their pause on additional tariffs, offering a measure of relief to markets worried about the impact of escalating trade tensions on the global economy. The development raised hopes that the world’s two largest oil consumers could avoid further economic disruption, potentially shoring up demand for fuel.

Early morning today, Brent crude futures climbed up 26 cents, or 0.39 per cent, trading at $66.89 per barrel. US West Texas Intermediate (WTI) crude futures also advanced, gaining 22 cents, or 0.34 per cent, to $64.18, reported Reuters.

Trade truce offers temporary relief

US President Donald Trump extended the existing tariff truce with China by another 90 days on Monday. The move averts the imposition of triple-digit duties on Chinese imports at a time when US retailers are gearing up for the crucial end-of-year holiday season.

The extension has bolstered hopes that Washington and Beijing could find common ground on a broader trade agreement, potentially avoiding a near standstill in bilateral trade. Analysts note that tariffs not only dampen economic growth but also threaten to curb global fuel consumption, putting downward pressure on oil prices.

Focus shifts to Trump-Putin meeting

Beyond trade tensions, markets are now turning their attention to a planned meeting between President Trump and Russian President Vladimir Putin on 15 August in Alaska, where the two leaders are expected to discuss ending the conflict in Ukraine.

The meeting comes amid increased US pressure on Russia, including threats of harsher penalties for countries such as China and India that continue to buy Russian oil if no peace deal is reached.

“Any peace deal between Russia and Ukraine would end the risk of disruption to Russian oil that has been hovering over the market,” said Daniel Hynes, senior commodity strategist at ANZ, in a note.

Trump had previously set a deadline for Moscow to agree to peace or face secondary sanctions targeting its oil buyers. Both India and China have been urged to scale back their purchases of Russian crude, while Beijing has been warned of additional tariffs if it fails to comply. The likelihood of these sanctions being imposed appears to have diminished ahead of the Alaska meeting.

Market eyes US inflation data

Investors are also awaiting US inflation figures due later in the day, which could influence expectations on the Federal Reserve’s next interest rate move. Any indication that the central bank may consider rate cuts in the near term would be supportive for crude prices, given the potential boost to economic activity and energy demand.