Oil prices ticked higher on Tuesday but remained near four-year lows as recession fears exacerbated by trade conflict between the United States and China, the world’s two biggest economies offset a recovery in equity markets. Brent futures were up 66 cents, or 1.03%, at $64.87 a barrel. U.S. West Texas Intermediate crude futures rose 75 cents, or 1.24%, to $61.45. The two benchmarks had slumped by 14% and 15% respectively on Monday after U.S. President Donald Trump’s April 2 announcement of “reciprocal tariffs” on all imports. On Tuesday Beijing vowed not to bow to what it called U.S. “blackmail” after Trump threatened an additional 50% tariff on Chinese goods if the country did not lift its 34% retaliatory tariff. China’s commerce ministry said the country “will fight to the end,” ratcheting up fears over the global economy.
“The scenario has presented a case for a global recession, where fears of energy demand declining have emerged,” said Alex Hodes, director of market strategy at financial services firm StoneX, in a note on Tuesday. Goldman Sachs forecast that Brent and WTI crude prices would be at $62 and $58 a barrel by December 2025, and at $55 and $51 by December 2026, respectively, under different scenarios. The U.S. administration has indicated a strong preference for reducing crude prices to $50 or lower, considering this goal a top priority among its objectives, according to Natasha Kaneva, head of global commodities strategy at J.P.Morgan. “This includes being willing to endure a ‘period of industry disruption’ similar to the one experienced by the shale sector during the 2014 price war between OPEC and shale, if it ultimately results in lower cost of oil production,” Kaneva said. Still, oil prices were up 1%, which ING’s Warren Patterson described as a relief rally aided by steadier equity markets. Wall Street’s main indexes on Tuesday bounced back from a heavy selloff.
“The market has sold off heavily in recent days as it starts to price in a significant demand hit. However, how much of a demand hit we (will) see is still very unclear,” he said. Trump also made a surprise announcement on Monday that the United States and Iran were set to begin direct talks on Tehran’s nuclear program, but Iran’s foreign minister said the discussions would be indirect. “The talks … could indeed mark the beginning of the end-game phase in the nuclear drama, in which success could lead to more barrels (of oil) on the market, and failure could trigger a military confrontation,” said RBC Capital Markets analyst Helima Croft. A preliminary Reuters poll showed on Monday that U.S. crude oil and distillate inventories were expected to have risen last week by about 1.6 million barrels, indicating market expectations of weak demand. Weekly inventory data is due from the American Petroleum Institute industry group later on Tuesday and official data from the Energy Information Administration is due on Wednesday. Reuters
Oil rises 1% but trades at multi-year lows as China braces for US trade war
