Oil prices continued to rally on Tuesday, this time on reports that the United States has decided to delay the next round of tariffs that were to be imposed on Chinese goods.
The delay gives hope to a skittish market that the trade war really won’t go on forever.
For WTI, oil prices had climbed 4.30% by 12:36pm EDT to trade at $57.29. Brent Crude was trading up even more at 4.70%, at $61.32—resuming its over $60 per barrel that it had fallen under during the first week of August as the trade war stoked fears of souring oil demand growth.
Tuesday is the fourth straight day of gains for the oil prices—the previous gain helped along by Saudi Arabia’s chat with other OPEC producers about what additional steps the group could take to stanch the price bleed that sought to undermine not only Saudi Arabia’s budget which relies heavily on oil, but its much-anticipated public listing of its crown jewel, Saudi Aramco. Aramco’s valuation, which The Kingdom feels is $2 trillion, is dependent on oil prices. Analysts claim that this $2 trillion valuation is but a pipe dream, and that the real value of Aramco is at most $1.5 trillion.
In addition to the tariff delay, which will now go into force on December 15, the United States will also be taking some of the items on that tariff list off completely, according to its newest policy document published on the Office of the United States Trade Representative website. While the list hasn’t been made public, it will include items that will be removed “based on health, safety, national security, and other factors”.
The items that will be delayed until December include cellphones, laptops, toys, computer monitors, and some footwear and clothing items, according to the USTR website.
Oil will face another challenge this afternoon when the API estimates about crude oil inventory moves will be released.
By Julianne Geiger for Oilprice.com
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The trade war has been creating uncertainty in the global economy and also depressing the global demand for oil and, therefore, prices.
That is a good enough reason why President Trump should stop prevaricating and end his futile trade war against China.
Only an end to the trade war will change the economic outlook of the global economy, invigorate the global demand for oil and push oil prices upward.
President Trump who lost his trade war with China is finding it hugely difficult to admit defeat, hence the prolonging of a futile war.
President Trump has backed himself into a corner, leaving himself few face-saving ways to exit the trade war. Only one option is open to him now, namely to call off his trade war against China and negotiate an end to the war on China’s terms.
Meanwhile, the global economy continues to suffer.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London