Oil prices climbed on Wednesday, bouncing back from four-year lows earlier in the session, after U.S. President Donald Trump announced he would further increase tariffs on China but pause the tariff increases he announced last week for most other countries.
Trump authorized a 90-day pause as part of his tariff plan but also raised the tariff rate for China to 125%, effective immediately. The previously announced 104% tariff on China kicked in at 12:01 a.m. EDT (0401 GMT) on Wednesday.
Brent futures were up $1.82, or 2.9%, to $64.64 a barrel at 2:02 p.m. EDT (1802 GMT). U.S. West Texas Intermediate crude futures gained $1.92, or 3.22%, at $61.50.
Both contracts lost about 7% earlier in the session before the reversal.
“We’ve reached a turning point in the trade conflict with Trump giving the countries that have shown desire to work on a deal to get rid of tariffs some time to work it out,” said Phil Flynn, senior analyst with Price Futures Group.
“What Trump is doing is putting China out on an economic island all by themselves,” Flynn said.
China announced additional tariffs on U.S. goods, imposing 84% tariffs on U.S. goods from Thursday, in retaliation against President Donald Trump’s tariff policy.
However, the escalating trade war between China and the U.S. continued to pressure oil prices.
The trade conflict is stoking fears of a global recession, said UBS analyst Giovanni Staunovo. “While oil demand has likely not suffered yet, rising concerns of weaker oil demand over the coming months require lower prices to trigger supply adjustments to prevent an oversupplied market,” Staunovo added.
Countermeasures in Canada, a close U.S. ally and major trading partner, also took effect on Wednesday.
Meanwhile, countries in the European Union agreed on Wednesday to impose 25% tariffs on a range of U.S. imports in a first round of countermeasures, adding to China’s and Canada’s retaliatory measures.
“China’s aggressive retaliation diminishes the chances of a quick deal between the world’s two biggest economies, triggering mounting fears of economic recession across the globe,” said Ye Lin, vice president of oil commodity markets at Rystad Energy.
Brent and WTI have fallen for five sessions since Trump announced sweeping tariffs on most imports, prompting concerns over economic growth and demand for fuel.
Meanwhile, a decision last week by the OPEC+ group of producers to raise output in May by 411,000 bpd, which analysts say is likely to push the market into surplus, also offset the gains.
In the U.S., crude inventories rose by 2.6 million barrels to 442.3 million barrels last week, the Energy Information Administration said on Wednesday, compared with analysts’ expectations in a Reuters poll for a 1.4 million-barrel rise.
“Exports are on the lower level and we will have to see if we are going to lose access to the China market, and whether we will see a diminished export situation going forward,” said John Kilduff, partner with Again Capital in New York.
The operator of the Keystone oil pipeline system in Canada and the United States issued a force majeure notice on Wednesday after a leak in North Dakota, according to media reports.
The pipeline was shut on Tuesday after an oil spill near Fort Ransom, North Dakota.
