Oil prices and stocks gain as US tariff exemption eases trade war fears

Tariffs, rising supply and higher US crude stocks have weighed on oil futures this week

China, locked in a retaliatory tariff dispute with the US since last month, set its GDP growth target for this year at about 5 per cent. EPA

Oil prices rose on Thursday, snapping a four-day losing streak, while Asian stocks rebounded as investors remained hopeful that trade tensions might ease after the US granted car makers a one-month tariff exemption.

Brent, the benchmark for two-thirds of the world’s oil, was trading 0.35 per cent higher at $69.54 a barrel at 1.23pm UAE time on Thursday. West Texas Intermediate, the gauge that tracks US crude, was up 0.47 per cent at $66.62 a barrel.

Brent has shed nearly 5 per cent since Friday's closing level, as US President Donald Trump’s broad tariffs on US trading partners, the prospect of rising supply from Opec+, and a surge in US crude inventories weighed on sentiment.

“Global financial markets remain on an emotional edge amid a constant flow of news from the Trump administration,” said Ole Hansen, head of commodity strategy at Saxo Bank.

“Crude oil [has traded] lower amid fears that a global trade war may negatively impact global economic activity and, with that, demand for fuel products,” Mr Hansen added.

Demand concerns were further stoked after US crude stockpiles grew more than expected last week.

US crude inventories, an indicator of fuel demand in the world’s largest economy, increased by 3.6 million barrels to 433.8 million barrels in the week that ended on February 28, the US Energy Information Administration (EIA) said on Wednesday.

Analysts polled by Reuters were expecting a growth of 341,000 barrels.

The prospect of Opec+ adding more barrels to the market next month has also weakened crude prices.

On Monday, the alliance of producers said it would proceed with a “gradual and flexible” unwinding of voluntary production cuts of 2.2 million barrels per day starting on April 1, adding 138,000 bpd per month until September 2026.

A planned 25 per cent US tariff on Mexican and Canadian goods went into effect on Tuesday, alongside an additional 10 per cent duty on Chinese imports.

Global financial markets remain on an emotional edge amid a constant flow of news from the Trump administration

Ole Hansen,
head of commodity strategy, Saxo Bank

Canada and Mexico are two of the largest crude suppliers to the US market. Oil exports from Canada face a lower tariff of 10 per cent.

However, the US granted car makers a temporary one-month tariff exemption, contingent on their compliance with existing free trade regulations, boosting optimism about a possible easing of the trade dispute's impact.

Mr Trump is also open to considering other products for tariff exemptions, the White House said.

The announcement boosted Asian stocks.

Tokyo's Nikkei 225 index finished 0.77 percent higher and the Korea Composite Stock Price Index gained 0.70 per cent. Hong Kong's Hang Seng index ended the day 3.3 per cent up, while the Shanghai Composite Index rose 1.2 per cent.

China, locked in a retaliatory tariff dispute with the US since last month, set its gross domestic product growth target for this year at about 5 per cent and announced stimulus measures to revive its economy, which has been impacted by weak consumer spending and a property sector downturn.

Beijing, which raised its 2025 budget deficit target to about 4 per cent of GDP from 3 per cent last year, will issue 1.3 trillion yuan ($180 billion) in ultra-long-term special treasury bonds this year, 300 billion yuan more than the previous year. The government will also issue 500 billion yuan in special treasury bonds to support major state-owned commercial banks.

However, Wall street is set to open lower on Thursday after closing higher in the previous session. S&P 500 future, which track the S&P 500 stock market index, were down 0.71 per cent, while Nasdaq futures dropped 0.97 per cent.

The Euro Stoxx 50 index was up 0.41 per cent during early trade, while the UK's benchmark FTSE 100 share index fell by 0.80 per cent.

This move to exempt car makers should not “come as a surprise” as companies had warned that tariffs could lead to significant price increases for consumers, Zain Vawda, market analyst at forex broker Oanda, said in a research note on Wednesday.

“The question, however, is whether such [stock market] gains will remain sustainable moving forward or just temporary, as risk and uncertainty remain in play,” he added.

Meanwhile, the US dollar has weakened against most currencies this week due to concerns that tariffs would hurt economic growth and raise inflation.

The US Dollar Index – a measure of the value of the greenback against a weighted basket of major currencies – was down 1.57 per cent at 104.17 at 12.15pm UAE time, extending its decline for the fourth straight day.