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By Laila Kearney
NEW YORK - Oil prices gained about 3% on Friday a day after recording their biggest daily drop in several years on U.S. President Donald Trump's vow to impose more tariffs on Chinese imports.
For the week, crude oil benchmarks recorded a loss.
Washington's new tariffs on China, due to take effect on Sept. 1, intensify the trade war between the world's top two economies. Any resulting economic slowdown could hurt crude demand.
Brent crude futures for October delivery settled at $61.89 a barrel, up $1.39, or 2.30%. The global benchmark slid more than 7% on Thursday, the steepest daily drop in more than three years.
WTI crude futures for September delivery settled at $55.66 a barrel, rising $1.71, or 3.17%, after Thursday's nearly 8% plunge, the biggest loss in more than four years.
For the week, Brent lost about 2.7%, while WTI shed about 1.2%.
Before Thursday's decline, crude futures had seen a fragile rally supported by steady drawdowns in U.S. inventories but pressured by a shaky global demand outlook.
"The market is still digesting the impact of the tariffs on oil markets, but given China has been taking very little U.S. crude year-to-date, we see little scope for the tariffs to directly impact market fundamentals," RoboResearch Commodities Strategist Ryan Fitzmaurice said in a note.
Trump said he would impose a 10% tariff on $300 billion of Chinese imports and said he could raise tariffs further if China's president, Xi Jinping, failed to move more quickly toward a trade deal.
The announcement extends U.S. tariffs to nearly all imported Chinese products. China said it would not accept "intimidation or blackmail" and pledged countermeasures.
China, once the top buyer of U.S. crude, slashed its purchases last year as the trade war dragged on.
The escalating trade war, however, could push the U.S. Federal Reserve toward more interest rates cuts, which would likely boost oil prices.
"The trade war is going to increase the odds dramatically that the Fed is going to have to cut rates again, maybe twice this year," said Phil Flynn, an analyst at Price Futures Group in Chicago.
U.S. crude oil exports surged 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd as South Korea bought record volumes and China resumed purchases, data from the U.S. Census Bureau showed.
The market also watched the weekly U.S. oil rig count, an indicator of future production, which fell for a fifth week in a row as most independent producers cut spending even though majors were still pushing ahead with investments in new drilling.
(Reporting by Laila Kearney; Additional reporting by Noah Browning and Aaron Sheldrick and Devika Krishna Kumar; Editing by Marguerita Choy and Leslie Adler)