Oil prices rallied nearly 3% on Friday, a partial rebound from their biggest daily drop in several years on US President Donald Trump’s promise to impose more tariffs on Chinese imports.
The tariffs, due to take effect on September 1, intensify the trade war between the world’s top two economies and oil consumers. Any resulting economic slowdown could hurt crude demand.
Benchmark Brent crude was up $1.74, or 2.9%, to $62.24 a barrel by 10:42 a.m. EDT (1440 GMT). Brent slid more than 7% on Thursday, the steepest daily drop in more than three years.
The US crude benchmark gained $1.25, or 2.3%, to $55.20 a barrel, a day after tumbling nearly 8%, the biggest loss in more than four years.
Before the slide, crude futures had seen a fragile rally supported by steady drawdowns in US inventories but pressured by a shaky global demand outlook.
“We’re obviously coming back pretty substantially at least in the early going because I think people realize that the market was overdone with the selloff yesterday,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
“Also, there are some questions as to whether the Trump tariffs are really going to go into effect and if they’re really going to have a negative impact on demand as much as people think.”
Trump said he would impose a 10% tariff on $300 billion of Chinese imports and could raise tariffs further if China’s President Xi Jinping failed to move more quickly toward a trade deal.
The announcement extends US tariffs to nearly all imported Chinese products. China said it would not accept “intimidation or blackmail” and pledged countermeasures.
The US economy expanded by 2.1% in the second quarter, government data showed on July 26, beating economists’ expectations but lower than first-quarter growth.
Still, there was evidence that the trade dispute was taking a toll.
China this week reported slowing manufacturing activity in July. US data showed manufacturing activity also slipped last month to the lowest in nearly three years, while construction spending fell in June as investment in private projects tumbled to the lowest level in 1-1/2 years.
The market looked toward the weekly US oil rig count, an indicator of future production, at 1 p.m. EDT. The United States last year became the world’s top oil producer and was forecast to set another record in output production this year.