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Oil rises, but US-China trade tussle caps gains

Oil rises, but US-China trade tussle caps gains

Mubasher: Oil prices rose on Tuesday as wagers on a price drop prompted traders to buy back futures to book profits, given the decline streak that lasted during the prior three sessions, which was fuelled by escalating trade tensions between the US and China, according to Reuters.

By 7:57 am GMT, global benchmark Brent futures rose by 0.48% to $60.10 per barrel (pb), while US Nymex crude futures climbed by 0.77% to $55.11 pb.

Brent dropped by more than 8% during the last three trading sessions, compared with its last close on 31 July, after US President Donald Trump vowed to levy new tariffs on Chinese goods, which prompted Beijing to make more moves against US farm imports.

On the currency front, Washington lashed out at China, in response to a drop of the yuan (CNY) to its lowest in more than a decade, describing the Asian nation as currency manipulator.

However, the People’s Bank of China (PBoC) fixed the yuan, helping in plucking the currency out of the recent lows.

On Monday, Brent dived by over 3% on the back of worries that an escalation in the trade war between the world’s two biggest oil consumers would hamper global demand, fanning Tuesday’s short-covering.

“There is large uncertainty surrounding demand, [with] a lot of attention being paid to the commentary surrounding the trade war and its developments, [while] there’s talk of this potentially causing recession in parts of Asia and Europe,” Sydney-based Frame Funds research analyst Harrison Fleming was quoted by Reuters.

On the supply front, Iran threatened to block all energy shipments out of the Strait of Hormuz, a crucial conduit through which a fifth of global oil flows, if it was not able to export crude as per pledged under a 2015 nuclear accord with the world’s major powers.

Moreover, oil prices are likely to have some support later on Tuesday, amid expectations of an eighth straight weekly drawdown in US crude oil stockpiles, according to a Reuters poll.

The American Petroleum Institute (API) is due to release its weekly inventory report later in the day, followed by the US Energy Department’s official data on Wednesday.