Oil Prices Edge Higher as US-China Tariff Truce Fuels Trade Optimism
Oil prices rose on Tuesday after the United States and China agreed to extend a pause on higher tariffs. The move eased fears that an escalation in their trade war could hurt economic growth and reduce fuel demand in the world’s two largest oil-consuming nations.
Brent crude futures were up 14 cents, or 0.2%, at $66.77 a barrel by 06:43 GMT. U.S. West Texas Intermediate (WTI) crude futures gained 8 cents, or 0.1%, to $64.04.
Tariff Truce Extends to November
U.S. President Donald Trump extended the tariff truce with China until November 10, avoiding steep triple-digit duties on Chinese goods. The move comes as U.S. retailers prepare for the crucial end-of-year holiday season.
This extension has raised hopes for a potential agreement between the world’s largest economies, which could prevent a virtual trade embargo. Tariffs have been a key risk to global growth, potentially weighing on fuel demand and oil prices.
Support from US Labour Market Data
Oil’s gains were also supported by signs of weakness in the U.S. labour market, which boosted expectations for a Federal Reserve interest rate cut in September, said Priyanka Sachdeva, senior market analyst at Phillip Nova. Lower rates typically stimulate economic activity and increase oil demand.
Markets are also watching U.S. inflation data due later today, which could influence the Fed’s monetary policy path.
Geopolitical Risks: Trump-Putin Meeting
On Friday, Trump and Russian President Vladimir Putin are set to meet in Alaska to discuss ending the war in Ukraine.
“The U.S.-Russia diplomatic track on the Ukraine conflict remains a wildcard, with traders monitoring for any surprises that could disrupt supply chains or lead to new sanctions,” Sachdeva noted.
The meeting comes as the U.S. pressures Russia, threatening harsher penalties on its oil buyers, including China and India, if no peace deal is reached.
Sanction Risks Ease Ahead of Talks
ANZ senior commodity strategist Daniel Hynes said that a peace deal between Russia and Ukraine would remove the threat of supply disruptions from Russian oil that has been looming over the market.
Trump previously set a deadline for Russia to agree to peace or risk secondary sanctions on its oil buyers. Washington has also pushed India and China to scale back Russian oil imports, warning of additional tariffs.
The likelihood of these sanctions being enforced has decreased ahead of the August 15 Trump-Putin meeting.
