Oil recovers losses after Trump says China trade deal still on

Oil pared losses after falling from a three-month high as a White House official said the U.S.-China trade deal was in place, clarifying his earlier remarks that sowed confusion about whether the agreement was over.

Futures in New York initially dropped as much 2.4% as oil was swept up in a broader market rout after Trade Adviser Peter Navarro said “it’s over,” when asked in a Fox News interview about the trade agreement with China. Prices recovered after he clarified that the remarks were about trust, rather than the trade deal, with President Donald Trump following up with a tweet that said the deal was “fully intact.”

The relationship between the U.S. and China had been on shaky ground, even after they agreed on their phase-one trade deal. In the latest developments, the U.S. imposed constraints on four more Chinese media companies, while the Asian nation blocked poultry imports from a Tyson Foods Inc. plant where hundreds of people tested positive for the virus.

“Trump would be very reluctant to officially walk away from the deal in an election year, given the potential impact it would have on markets,” said Warren Patterson, head of commodities strategy at ING Bank NV. “Attention in the oil market will turn back quickly to efforts from OPEC+ to re-balance the market” after the clarification that the trade deal was still fully intact, he said.

Oil has rallied since plunging below zero in April and is now trading at levels last seen before Russia and Saudi Arabia engaged in a damaging, although short-lived, price war. The kingdom’s Energy Minister Prince Abdulaziz bin Salman said last week that OPEC+ is on track to rebalance the market, and some of the world’s largest traders are seeing a rapid recovery in demand.

Delta Air Lines is resuming flights to China, and New Jersey Governor Phil Murphy said that Atlantic City casinos and indoor dining will reopen statewide on July 2. The U.K. reported fewer than 1,000 new cases for the first time since its lockdown was declared March 23. Still, the number of new cases globally reached a record, fueled by a surge in Latin America and concerns for a second wave of infections remained.