Oil up in choppy trading

Volatile oil prices gained slightly on news of Russian oil contamination joined supply factors from Iran and North Korea while fears of an all-out Sino-US trade war mount.

At 08:00 GMT international Brent Oil Futures were $70.80 up 0.55% on the previous day’s close and US Crude Oil WTI Futures were $62.19 up 0.79%.

The additional tariffs kicked in at 12:01AM Washington time. Tariffs have now risen to 25% from the previous 10% on more than 5,700 different product categories from China.

China immediately said in a statement that it is “forced to retaliate”, but did not provide any further details.

Top US and Chinese negotiators including Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin ended the first of two days of discussions in Washington and were expected to resume talks on Friday.

The talks have so far made little progress, with the mood around them downbeat, Bloomberg reported citing people familiar with the talks.

Oil drew some support earlier in the day on seemingly renewed hopes for a China-US trade deal after U.S. President Donald Trump said he received a “beautiful letter” from Chinese President Xi Jinping.

Trump quoted the letter as saying: “Let’s work together let’s see if we can get something done.”

In other news, Wednesday’s data from the US Energy Information Administration reporting a crude stockpile drop of 4 million barrels last week, projectiles fired from North Korea, ongoing fighting in Libya and threats by Iran to shut down two of the world’s most important waterways have all received some focus this week, but were largely overshadowed by trade-related news.

An oil contamination also forced Russia to halt flows along the Druzhba pipeline, a key conduit for crude into Eastern Europe and Germany, in April. The suspension left refiners scrambling to find supplies, and its duration is unclear. Polish officials expect the pipeline will be operating normally later this month.

Ed Moya, Senior Market Analyst at OANDA, said the Iran situation could be a bullish catalyst for oil prices once trade tariff resolved. He also said a scenario of trade talks complete fell apart is “the least likely outcome” but U.S. equities could tumble 10% along with crude if it happens.