SINGAPORE: Oil prices rose in early trading on Tuesday by an easing of tension between the US and China, giving support to hopes that a trade war between the two economies can be avoided. Brent crude rose 1.18 per cent on Tuesday morning, edging close to the $70 a barrel mark, while US benchmark West Texas Intermediate crude rose 1.2 per cent to $64.19.
Fears of a global trade war eased after a Chinese President Xi Jinping delivered a speech in which he spoke of a more open economy and reduced import tariffs on vehicles. Although he did not mention the US specifically, traders seem to be focusing on the positive aspects of Xi’s speech, with Asian markets buoyed by his remarks — both Hong Kong’s Hang Seng Index and Japan’s Nikkei 225 climbed more than 1 per cent on Tuesday.
Meanwhile, prices could rise further as President Trump has promised a ‘forceful’ response to the alleged chemical attack that took place in the Middle East over the weekend, telling reporters: “We have a lot of options militarily.”
Analysts warned that US intervention could pose serious geopolitical risks, given that Russia has warned the US against taking military action in the region.
“Will the US and Russia go into a confrontation in the region? This likely depends on Trump’s decision over the next 24 hours, but the risks are high,” said Hussein Sayed, chief market strategist at FXTM.
“Although oil prices may have risen on hopes that trade tensions will ease, investors may start pricing in a much higher risk premium. So far, it seems the conflict has no impact on the supply from the Middle East, but if the battle spills outside the border, I expect another $10 risk premium to be added to the current price.”— Reuters
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