Oil pared its decline from a three-month high as investors turned their attention back to improving demand and easing supply after the market was momentarily roiled by U.S.-China trade confusion.
Futures in New York recovered most of its earlier losses after President Donald Trump said the trade deal with Beijing was “fully intact” following remarks from Trade Adviser Peter Navarro that were interpreted as an end to the pact.
He quickly clarified his comments. Oil has rallied in recent days above $40 a barrel as some U.S. states moved forward with the phased reopening of their economies, while physical crude prices are climbing due to cuts by Russia.
However, a Bloomberg survey is predicting U.S. stockpiles rose by 2 million barrels last week, a sign that the recovery is likely to be uneven. If confirmed by government data Wednesday, it would be a third weekly gain.
Oil has rebounded since plunging below zero in April and is now trading at levels last seen before Russia and Saudi Arabia engaged in a damaging, although short-lived, price war.
The kingdom’s Energy Minister Prince Abdulaziz bin Salman, said last week that OPEC+ is on track to rebalance the market, and some of the world’s largest traders are seeing a rapid recovery in demand.
“The OPEC+ supply cuts have done their work,” said Howie Lee, an economist at Oversea Chinese Banking Corp.
“The upward momentum remains strong going into the end of quarter; it does seem that the market will see a supply deficit by the fourth quarter.”
West Texas Intermediate for August delivery was 18 cents lower at $40.55 a barrel on the New York Mercantile Exchange as of 7:50 a.m. London time after falling as much as 2.4% earlier.
