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Oil prices remained relatively stable on Tuesday, supported by the extension of the U.S.-China tariff truce, which eased concerns over a potential escalation in their trade war that could hurt oil demand.
Brent crude futures edged down by 2 cents to $66.61 per barrel by 0904 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell 10 cents, or 0.2%, to $63.86.
U.S.-China Tariff Truce Boosts Market Sentiment
U.S. President Donald Trump announced the extension of a tariff truce with China until November 10, preventing the imposition of triple-digit duties on Chinese goods. This move alleviated concerns about further escalation in the trade conflict, which had the potential to disrupt trade and impact oil consumption, especially as U.S. retailers prepare for the crucial end-of-year holiday season.
The extension raised hopes that the two largest economies in the world could reach an agreement, avoiding a trade embargo. If tariffs were to increase, they could slow global growth, negatively impacting fuel demand and potentially dragging oil prices lower.
Federal Reserve Rate Cut Expectations Support Oil Prices
Oil prices were also supported by signs of softness in the U.S. labor market, which have fueled expectations of a Federal Reserve rate cut in September. A rate cut typically stimulates economic activity, which in turn boosts oil demand, adding to the bullish sentiment in the market.
Investors are also keeping an eye on the U.S. inflation data set to be released later in the day, as this could influence the Fed’s future rate path.
Russia-U.S. Tensions Weigh on Market
However, potential pressure on the oil market comes from the ongoing tensions between the U.S. and Russia. Trump is scheduled to meet Russian President Vladimir Putin in Alaska on Friday to discuss an end to the war in Ukraine. As part of this discussion, the U.S. has intensified pressure on Russia, warning of secondary sanctions on Russian oil buyers such as China and India if a peace deal is not reached.
Trump set a deadline for Russia to agree to peace in Ukraine by last Friday or face the risk of sanctions on its oil customers, particularly India and China, urging them to reduce their purchases of Russian oil. This situation adds uncertainty to the oil market in the backdrop of ongoing geopolitical tensions.
