Oil prices rose almost 5% on Tuesday after the United States said it would delay imposing a 10% tariff on certain Chinese products, easing concerns over a global trade war that has pummeled the market in recent months.
The Chinese products include laptops and cellphones. The tariffs had been scheduled to start next month.
“The U.S.-China trade war has caused energy demand growth to take a big hit. Any glimmer of hope revives the prospects for a more positive demand landscape,” said John Kilduff, partner at energy hedge fund Again Capital Management in New York.
Brent LCOc1 futures were up $2.69, or 4.6%, at $61.26 a barrel by 1:33 p.m. EDT (1733 GMT), while U.S. West Texas Intermediate (WTI) crude CLc1 was up $2.07, or 3.8%, at $57.00.
That put Brent futures on track for their biggest daily percentage gain since December.
The Chinese Ministry of Commerce said in a statement on Tuesday that U.S. and Chinese trade officials spoke on the phone and agreed to talk again within two weeks.
“The possibility that the United States and China can get the trade talks on track … is raising hopes that they might actually get some type of deal,” said Phil Flynn, analyst at Price Futures Group in Chicago.
“That’s why we are seeing this big rebound in prices,” Flynn said.
Before the U.S. announcement about the tariff delay, Brent futures were still trading about 20% below the 2019 high they hit in April.
Oil prices seesawed earlier in the day, caught between demand worries and rising global supplies and expectations for deeper production cuts from leading producers.
U.S. oil output from seven major shale formations was expected to rise by 85,000 barrels per day (bpd) in September to a record 8.77 million bpd, the Energy Information Administration forecast in a report.
Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), last week said it planned to keep its crude.
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