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(Bloomberg) -- Oil prices surged for the first time since US President Donald Trump launched a trade war against most of America’s trading partners as some countries won a brief reprieve on Wednesday.
Global benchmark Brent crude advanced above $65 a barrel after plunging for four sessions and slipping below $60 for the first time since 2021. West Texas Intermediate climbed to above $61.
Trump announced a 90-day pause on higher reciprocal tariffs that hit dozens of trade partners after midnight. The latest move rippled across broader markets, sending equities and commodities surging on the prospect that the conflict in international commerce would ease, reducing the likelihood of a recession. It wasn’t immediately clear which nations would receive tariff relief, and China and US continue to escalate their trade war, with Trump raising duties on the nation to 125%.
“A relief rally in broader markets is dragging crude higher, but the pause on other countries is far less impactful when tariffs on China are up as they are a major driver of crude demand growth,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
Traders had piled into bearish option bets and short positions in the lead up to Wednesday, leaving the door open for further knee-jerk surges if bullish headlines send traders scrambling to cover those bets.
Oil’s losses had been compounded by a decision by the OPEC+ alliance to revive output at a faster clip than previously expected. While Riyadh may be indulging Trump’s push for cheaper fuel to gain political favor, OPEC+ delegates said the decision was ultimately aimed at quota violators like Kazakhstan and Iraq. The one-two punch spurred concerns that a previously anticipated oil glut will now be even bigger.
The recent selloff also extended deep into the oil futures curve, pointing to an emerging oversupply just a few months down the line, though market participants warn it’s challenging to read into future balances.
“It’s hard to know how to value oil into the end of the year with the tariff headlines,” said Scott Shelton, an energy specialist at TC ICAP. “It’s probably a buying opportunity, but until the trade war gets settled, it’s pointless to try and make sense of these numbers.”
Prices also found some support after a key pipeline that ferries Canadian crude to US markets was shut after a spill, potentially tightening supplies at Cushing, Oklahoma, the delivery point for benchmark US futures.
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