Crude oil futures were higher during mid-morning Asia trade Monday as concerns of a US-China trade war abated after US Secretary Steven Mnuchin said that both countries were “putting the trade war on hold” as they worked out an agreement.
The bullish Baker Hughes report on US shale oil rig count had also provided some support to oil prices.
At 11.25 amSingapore time (0325GMT), July ICE Brent crude futures was up 54 cents/b (0.69%) from Friday`s settle to $79.05/b, while the June NYMEX light sweet crude contract rose 59 cents/b (0.83%) to $71.87/b.
The trade war between US and China is currently “on hold” after the two countries agreed to drop their trade tariff threats to work on a broader trade agreement, U.S. Treasury Secretary Steven Mnuchin Sunday said.
Even though the agreement lacked the specific $200 billion reduction in the US trade deficit with China that was US President Donald Trump`s signature demand on trade, the president halted tariffs he had threatened to impose on $150 billion in Chinese products.
Chinese Vice-Premier Liu He described the deal as a “win-win choice”.
“The agreement to suspend plans for further imposition of tariffs ahead of the consultation deadline for the $150 billion tariff plan did help to hold up the near term sentiment with respect to this geopolitical concern,” IG market strategist Pan Jingyi said.
Meanwhile, data released by Baker Hughes Friday showed that US shale rig count were unchanged for the week ending May 18 at 844.
“The pick-up in drilling activity in the US shale industry was weakening,” ANZ analysts said, in a note, referring to the Baker Hughes data.
The rig count being unchanged came as a surprise to market participants who expected the number to increase amid strong crude prices, analysts said.
Market focus had also shifted back to geopolitics on details and impact of the Iranian sanctions as well as elections held in Venezuela on Sunday, said analysts.
Britain was seeking a waiver for energy companies to continue trading with Iranian counterparts, despite President Donald Trump re-imposing sanctions on OPEC`s third largest oil producer, a government minister told S&P Global Platts in an interview Thursday.
“Our decision, therefore, is to continue to work with Iran on the basis that there are other parties to this agreement besides the United States,” Alistair Burt, minister for the Middle East and North Africa, said in an interview Thursday.
“We need to evaluate exactly what the United States is going to do in terms of its sanctions and how they will impact,” he added.
Meanwhile, Venezuela went to the polls on Sunday, with only 30% of the electorate turning out to vote, unofficial monitors showed.
The United States condemned Venezuela`s election as “an insult to democracy” and opposition leaders rejected a “fraud foretold” on Sunday.
Risa Grais-Targow, Eurasia Group director for Latin America, in an interview with Platts ahead of the elections had said that, “I think the US has already been pretty clear that they view these elections as fraudulent. So I think, at a minimum, they will reject the results and refuse to recognize them. There could be some additional sanctions in response as well.”
Targow added that Venezuela maybe subject to milder sanctions from the US to begin with, something more like a ban on the sale of diluents and lighter crudes to Venezuela or potentially an insurance-related ban that would affect their oil cargoes.
“The decline in Venezuelan oil production could worsen if the expected re-election of Maduro sparks unrest and US President Trump imposes further sanctions, as threatened, ” Commerzbank analysts said in a note.
As of 0325 GMT, the US Dollar Index was up 0.16% at 96.75.
This article provided by NewsEdge.