Oil extended gains as hints of trade detente between the US and China, and the prospect of monetary stimulus buoyed financial markets.
Futures in New York rose 0.4 percent after closing up 2.4 percent on Monday. The White House will extend exemptions protecting US customers from a ban on doing business with Huawei Technologies Co. for another 90 days, Commerce Secretary Wilbur Ross said on Monday. The move comes after President Donald J. Trump delayed new tariffs on some Chinese goods until mid-December.
Crude has swung between gains and losses this month as investors reacted to trade war developments. Germany is preparing fiscal stimulus measures to head off the chances of a deep recession, while more Federal Reserve rate cuts are expected to shore up American growth. Analysts are forecasting that US stockpiles fell for the first time in three weeks, a positive sign for oil markets.
“The outcome of the next US-China trade meeting will be the true litmus test for oil markets,” said Stephen Innes, managing partner at VM Markets Pte. in Singapore. “Oil traders don’t want to race too far ahead of the economic realities of the trade war narrative, so a bit of profit-taking is in order.”
West Texas Intermediate crude for September delivery rose 24 cents, or 0.4 percent, to $56.45 a barrel on the New York Mercantile Exchange as of 7:23 a.m. in London. The contract, which expires on Tuesday, increased $1.34 on Monday. The more active October contract added 23 cents to $56.37.
Brent for October settlement advanced 23 cents to $59.97 on the ICE Futures Europe Exchange after climbing 1.9 percent on Monday. The global benchmark crude traded at a premium of $3.61 a barrel to WTI, the lowest since March 2018.
While the White House’s move on Huawei was seen as encouraging for the prospects of a trade deal between the world’s two largest economies, the US added more than 40 affiliates of the Chinese company to a trade blacklist. Huawei said in a statement the reprieve doesn’t change the fact that it has been “treated unjustly.”
Boston Fed President Eric Rosengren and Kansas City Fed President Esther George pushed back against further US rate cuts, the first time Fed Chair Jerome Powell has faced a double dissent since he took the central bank’s helm in February 2018. Powell’s speech at the annual central banker retreat in Jackson Hole, Wyoming, on Friday will be particularly closely watched.
American crude stockpiles fell by 1.4 million barrels in the week through August 16, according to the median estimate in a Bloomberg survey. The official data from the Energy Information Administration is due on Wednesday.