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Oil prices rebound more than 2% after plunging on Donald Trump's tariff plan

File photo. Photograph:( Reuters )

Reuters London, United Kingdom Aug 02, 2019, 06.30 PM (IST)

Oil prices rose more than 2% on Friday, regaining some ground after their biggest falls in years on US President Donald Trump's threat to impose more tariffs on Chinese imports.

The move, due to take effect on September 1, intensifies a trade war between the world's top two economies and oil consumers that has disrupted global supply chains and roiled financial markets.

Any resulting economic slowdown could dent oil demand.

Benchmark Brent rose $1.56, or 2.6%, to $62.06 a barrel by 1210 GMT on Friday, after slumping more than 7% on Thursday, their steepest drop in more than three years.

US crude gained $1.29, or 2.4%, to $55.24 on Friday, after tumbling nearly 8% the previous day when they posted their biggest drop in more than four years.

Thursday's slide ended a fragile rally built on steady drawdowns in US inventories, even though global demand looked shaky due to the trade dispute.

"Given the latest turn in US-Sino trade relations, sustaining this uplift may be subject to how China chooses to respond to President Trump's new tariff initiative", said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.

"The rise in oil prices may be simply the result of a technical bounce back from an oversold close," he told the Reuters Global Oil Forum, referring to Thursday's tumble.

Trump said on Thursday he would impose a 10% tariff on $300 billion of Chinese imports and could raise tariffs further if China's President Xi Jinping failed to move more quickly to strike a trade deal.

The announcement extends Trump's tariffs to nearly all of China's imports into the United States.

China said it would not accept any "intimidation or blackmail" and pledged countermeasures should the tariffs go into effect.

The US economy expanded by 2.1% in the second quarter, government data showed on July 26, beating economists' expectations although it was lower than first-quarter growth.

Still, there are signs of the economic toll of the trade dispute between the United States and China, which this week reported slowing manufacturing activity in July.

US manufacturing activity also slipped last month, dropping to a near three-year low, and construction spending fell in June as an investment in private construction projects tumbled to its lowest level in 1-1/2 years, data showed.

Story highlights

The move intensifies a trade war between the world's top two economies and oil consumers that has disrupted global supply chains and roiled financial markets.