Oil jumped after U.S. President Donald Trump said that China wanted to restart trade talks, potentially easing escalating tensions between the two countries.
Futures in New York rose as much as 0.8%, snapping the longest run of declines in more than five weeks. Trump’s comments reversed a drop of as much as 2.2% that had looked set to continue the streak of losses for a fifth day. Trump’s words cooled concern that China’s plan to halt purchases of American crude and threats of tougher U.S. levies would worsen an already shaky global demand outlook.
"China called last night our trade people and said let’s get back to the table," Trump told reporters at the Group of 7 meeting in Biarritz, France. “We’re going to start very shortly and negotiate and see what happens but I think we’re going to make a deal.”
West Texas Intermediate crude for October delivery rose $0.41, or 0.8%, to $54.58 a barrel on the New York Mercantile Exchange as of 12:59 p.m. in Dubai. WTI reversed declines of as much as $1.21 earlier.
Brent for October rose $0.40 to $59.74 a barrel on the ICE Futures Europe Exchange. Brent traded at a premium of $5.21 to WTI.
“The hot and cold approach to negotiations continues and is creating a great deal of confusion,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “At this stage we have to assume that tariffs will be raised which is not good for growth and demand.”
Asked by reporters in Beijing about Trump’s remarks shortly after the American president spoke, China’s Foreign Ministry spokesman Geng Shuang said that he wasn’t aware of any weekend calls between the two countries. He repeated China’s position that the trade war should be settled through negotiation.
Futures in New York had dropped on Friday after Beijing said it would impose retaliatory tariffs on another $75 billion of U.S. goods, including oil for the first time. President Trump later responded with additional tariff increases on Chinese goods, and also called for American companies to pull out of Asia’s largest economy.
Trade hostilities wrong-footed hedge funds, who had slashed bearish bets on crude in the week through Aug. 20. Oil had rallied by more than 10% from a low in early August, as relations between the U.S. and China appeared to be improving, before it started falling last Wednesday.
“Trump increasingly sounds like he needs the deal more than China and he is playing a very high stakes poker game right now,” Hansen said.