Oil prices recovered slightly on Friday after US president Donald Trump’s latest trade threat saw the value of the commodity fall by the most in over three years.
Brent crude futures (BZ=F) fell by almost 8% on Thursday — the largest decline since February 2016 — before settling at around $60.50 a barrel. Prices rose by 1.8% on Friday, to around $61.60 a barrel.
Meanwhile, West Texas Intermediate, considered the global benchmark for crude oil, also fell nearly 8%, in its biggest decline since February 2015.
Trump said on Twitter on Thursday that his administration would launch a 10% tariff on an additional $300bn of Chinese goods on 1 September, in a move that will only inflame global trade tensions.
The move is a dramatic expansion of the number of imports subject to trade levies, and a significant escalation of the US–China tariff war that began in early 2018.
“Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country,” Trump said in his tweet.
“Risk assets have taken a pounding and gold has rallied very hard from its lows of the days. Oil has taken an absolute pounding. This has just completely taken the market off guard,” said Neil Wilson, chief market analyst for Markets.com, in a note.
“These are big, big moves and highlight the kind of sensitivity the market has to trade,” he said.
It had already been a difficult day for the oil market, with markets unimpressed with the US Federal Reserve’s more neutral than expected stance on further interest rate rate cutes.
US stocks look set for a lower open after they fell into negative territory on Thursday, with futures on all three major indices down.