Oil futures climbed Friday, bouncing back from a plunge that saw the U.S. benchmark suffer its biggest one-day fall in more than four years after President Donald Trump moved to impose additional import tariffs on Chinese goods.
Trump’s announcement, through a series of tweets Thursday afternoon, ramped up tensions surrounding the trade war and stoked fears about global energy demand.
News of the tariffs “deep sixed the market and fundamentally it was overdone” falling by nearly 8% on Thursday, only to rebound in Friday dealings, said Daniel Flynn, analyst at Price Futures Group.
West Texas Intermediate crude for September delivery CLU19, +2.69% rose $1.46, or 2.7%, to $55.41 a barrel on the New York Mercantile Exchange. The front-month contract was still on track to suffer a 1.4% weekly loss after Thursday’s 7.9% drop.
October Brent crude BRNV19, +2.89%, the global benchmark, rose $1.76, or 2.9%, to $62.26 a barrel on ICE Europe, following Thursday’s 7% slide. It trades 1.8% lower for the week.
Volatility for oil “will likely remain high as the market gets a feel for potential Chinese retaliatory measures in the coming days, while the more medium term macro situation has taken a hit with the chances of a swift U.S./Chinese rapprochement diminishing,” wrote analysts at JBC Energy, a Vienna-based consulting firm, in a note.
Trump on Thursday afternoon sent shivers across financial markets announcing that the U.S. would impose 10% tariffs on $300 billion of additional Chinese goods and products. The move, intensifying the long-running U.S.-China trade fight, came after both Washington and Beijing had earlier described recent talks as constructive.
Stocks gave up Thursday’s gains to end with solid losses, while investors piled into havens like Treasurys and gold. The U.S. dollar sold off on expectations the threat to global growth could prompt the Federal Reserve to be more aggressive than it signaled when it comes to further interest rate cuts following Wednesday’s easing.
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But the weaker U.S. dollar, typically a boon to commodities, offered no help for oil Thursday as fears about global growth appeared to spark a stampede out of crude and other assets viewed as risky.
See: Why Trump’s tariff tweet sparked market mayhem
WTI’s drop on Thursday marked the biggest percentage fall for a front-month contract since Feb. 4, 2015 and the settlement at $53.95 was the lowest since June 19, according to Dow Jones Market Data.
Independent energy expert Anas Alhajji said the Thursday decline was “not that common,” with just 55 out of 9,126 trading days showing a fall of more than 7%. “Most previous declines were associated with major events related to wars, financial crises and Saudi & OPEC actions. [On Thursday], we had none of these events,” he wrote in a report.
Trump’s announcement was a surprise to traders, who “reacted negatively, then algos played their magic until we hit the threshold for hedges, which led to a steeper decline in prices as banks tried to protect these hedges,” Alhajji told MarketWatch.
In other energy trade, September gasoline RBU19, +1.89% rose 3.1 cents, or 1.8%, to $1.7809 a gallon, trading 2.3% lower for the week, while September heating oil HOU19, +2.39% was up 4.2 cents, or 2.3%, to $1.8954 a gallon, poised for a weekly loss of 0.9%.
September natural gas NGU19, -5.31% was off 10.1 cents, or 4.6%, to $2.10 per million British thermal units, looking at a weekly decline of 2.4%.
U.S. natural gas supplies rose more than expected for the week ended July 26, by 65 billion cubic feet, according to the Energy Information Administration Thursday.
“With mild weather forecasted for the Midwest and West regions over the next 6-14 days, prices should struggle to find a leg of support in the short term, as demand weakens amidst surging production,” said Christin Redmond, commodity analyst at Schneider Electric.
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