LONDON: Oil prices retreated nearly 3 percent on Thursday as fears of a deepening US-China trade war and possible recession eclipsed earlier relief created by President Donald Trump’s announced 90-day pause on sweeping tariffs against most countries.
Brent futures fell $1.80, or 2.75 percent, to $63.68 a barrel by 3:11 p.m. Saudi time. While US West Texas Intermediate crude futures dropped $1.84, or 2.95 percent, to $60.51.
The retreat followed a volatile session on Wednesday, when crude benchmarks, which had tumbled as much as 7 percent earlier in the day, ended around 4 percent higher following Trump’s announcement of a tariff pause.
However, the reprieve excluded China. Trump increased tariffs on Chinese imports to 125 percent from 104 percent, deepening a trade standoff with the world’s second-largest economy and a leading consumer of crude.
The trade war between the US and China leaves significant uncertainty over oil demand growth with more risk to downside for prices, said Ashley Kelty, analyst at Panmure Liberum.
“Volatility remains high, and it remains tricky to see where oil prices may settle in near-term,” said Kelty.
China also announced an additional import levy on US goods, imposing an 84 percent tariff from Thursday.
Despite the tariff pause, Ole Hansen, head of commodity strategy at Saxo Bank, said the world was still facing the most severe trade barriers since the 1930s.
“With a lot of uncertainty still existing, the prospect for a major rebound in crude is not possible at this stage when the market has to deal with the risk of weakening demand and rising production from OPEC,” said Hansen.
Analysts at ANZ Research warned that a deeper global slowdown could push prices lower still.
“In a worst-case scenario of a global recession (which is not our base case), there is scope for further weakness ... for oil, we view $50/bbl as a likely support level,” the analysts said.
Investors were eyeing mixed supply drivers as well.
The Keystone oil pipeline from Canada to the US remained shut on Wednesday following an oil spill near Fort Ransom, North Dakota, while plans to return it to service were being evaluated, its operator South Bow said.
Elsewhere, the Caspian Pipeline Consortium resumed loading oil at one of two previously shut Black Sea moorings, it said on Wednesday, after a court lifted restrictions put on the Western-backed group’s facility by a Russian regulator.
In the US, crude inventories rose by 2.6 million barrels in the week to April 4, the Energy Information Administration said, nearly double the expectations in a Reuters poll for a 1.4-million-barrel rise.
