WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Intercontinental Exchange Brent crude spiked Tuesday afternoon, with both crude benchmarks gaining more than 4% after the United States announced a delay in additional tariffs on Chinese exports, easing tensions in a year-long trade war with Beijing.
Following four consecutive sessions of gains, NYMEX September West Texas Intermediate futures broke through $57 barrel (bbl), rallying $2.17 to settle at $57.10 bbl while the ICE October Brent contract surged $2.73 to settle at $61.30 bbl, the highest since Aug. 2.
NYMEX September ULSD futures advanced 7.15 cents to settle at $1.8773 gallon and the September RBOB contract ended 7.12 cents higher at $1.7364 gallon, with both contracts also adding 4%.
In a stunning turn of events, the Trump administration abruptly delayed imposition of new tariffs on $300 billion in Chinese goods set for Sep. 1, sending global equities and oil futures souring. Crude contracts settled at 1-1/2 week high on Tuesday after news broke that the impending 10% tariffs are now postponed until Dec. 15, while some of the items on the tariff list had been removed completely.
According to the policy document from the Office of the U.S. Trade Representative, certain products will be exempt from 10% levy due to health, safety and national security factors. The items that will be delayed until December include cellphones, laptops and clothing items, according to the USTR website. The announcement comes just days after President Donald Trump indicated the September meeting with China on trade was likely cancelled and tariff fight between the two countries extended into currency markets.
After prospects for both governments to reach a trade agreement seemed bleak, the news Tuesday managed to ease investors' fears of an ever escalating protracted tariff fight and raised hopes for a swift resolution. Global equities staged a turnaround on Tuesday following the steep declines a session prior, with the Dow Jones Industrial Average gaining more than 300 points and S&P up 1.4% amid trade optimism. Stoxx Europe was also up 0.5% after falling as much as 1% earlier Tuesday.
Meanwhile, market participants await weekly supply data from American Petroleum Institute set for release Tuesday afternoon at 4:30 p.m. EDT and the Energy Information Administration on Wednesday (8/14) at 10:30 a.m. EDT. According to Bloomberg survey, domestic crude oil inventories are expected to decline 1.57 million bbl during the week ended Aug. 9, while gasoline and distillate stocks are seen up build 348,500 bbl and 699,500 bbl with refinery utilization rates remained unchanged. Traders are anxious to see if last week's surprising 2.4 million bbl build in crude inventories would be offset by a draw, as crude inventories typically decline in this time of the year amid refinery maintenance season.
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