Brent crude traded around $70 a barrel as a two-day rebound petered out on signs the U.S. and China are still far from reaching a trade deal, while supply risks from the Persian Gulf to Venezuela kept investors wary.
Futures in London were steady after rallying 3.5% over Friday and Monday. President Donald Trump said the U.S. “isn’t ready” to make a trade deal with China, while reaffirming he’s not pursuing regime change in Iran. While that eased concern that oil flows will be disrupted, the situation remained tense as the Saudi Arabia-led coalition blamed Iran for supporting terror attacks.
Brent has now clawed back more than half of its trade war-induced tumble of around 6% over Wednesday and Thursday even though there hasn’t been any progress in resolving the conflict. A drop in working U.S. rigs to the least in a year has aided prices, and the supply backdrop is still rife with risks.
“I think the bounce we have seen in the last couple of days has taken the market by surprise,” said Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty in Sydney. “While supply issues certainly remain, it’s the demand picture that’s unclear.”
Brent for July settlement added 2 cents to $70.13 a barrel on London’s ICE Europe Futures at 7:25 a.m. in Singapore after dropping as much as 0.4% earlier. The contract closed up 2.1% on Monday. The global benchmark was at a $10.95 premium to West Texas Intermediate crude, the widest in almost a year.
WTI for July delivery gained 55 cents, or 0.9%, from Friday to $59.18 a barrel on the New York Mercantile Exchange. There was no settlement on Monday because of a public holiday in the U.S.
Trump, who is currently in Japan, said American tariffs on Chinese goods “could go up very, very substantially, very easily.” China over the weekend pushed back at the perception that the trade war is hurting its economy. Higher tariffs will have a “very limited” impact, and would hurt the U.S. about as much, said Guo Shuqing, head of China’s banking and insurance regulator.
Oil traders have largely interpreted Trump’s trade comments as a negotiating tactic, said CMC’s McCarthy. But “the tweet risk is an important part of today’s trading session given that the U.S. president is in our time zone,” he said.
The Saudi-led coalition claimed that it has foiled 35 terror attacks carried out by Yemen’s Houthi rebels in the Bab al-Mandeb Strait, between Yemen and Djibouti. “We have evidence that Iran’s revolutionary guards provided Houthi rebels with the ballistic missile technology and drones,” Arab coalition spokesman Colonel Turki al-Maliki told reporters Monday.