By Colleen Howe
BEIJING (Reuters) – Oil prices held near two-week highs in early trading on Wednesday, supported by an agreement between the U.S. and China to temporarily lower their reciprocal tariffs and a falling U.S. dollar.
Brent crude futures inched down 10 cents, or 0.15%, by 0008 GMT to $66.53 a barrel. U.S. West Texas Intermediate (WTI) crude slipped 7 cents, or 0.11%, to $63.60. Both benchmarks climbed more than 2.5% in the previous session.
The dollar index, which measures the greenback against a basket of currencies, fell 0.67% on Tuesday after data showed U.S. inflation was lower than expected. A weaker dollar makes oil less expensive for holders of other currencies, increasing demand.
The two largest economies on Monday agreed to pause their trade war for at least 90 days, with the U.S. cutting tariffs to 30% from 145% and China slashing duties on U.S. imports to 10% from 125%.
Prices had climbed more than $1.60 a barrel on Tuesday following the agreement, settling up nearly 3%.
Rystad energy analysts said in a note that the agreement had “eroded some demand side pessimism,” though cautioning that there could be lingering impact from the tariffs despite the rollbacks.
The market was supported by reported declines in U.S. gasoline and distillate inventories, a sign of resilient fuel demand.
Gasoline inventories fell by 1.4 million barrels and distillate stocks fell by 3.7 million barrels, market sources said on condition of anonymity, citing American Petroleum Institute figures on Tuesday. However, crude stocks rose by 4.3 million barrels.
Analysts polled by Reuters expected gasoline stocks to fall by 600,000 barrels, distillate inventories to rise by about 100,000 barrels and crude stocks to fall by 1.1 million barrels.
Official weekly inventory data from the U.S. Energy Information Administration is due on Wednesday at 10:30 a.m. EDT (1430 GMT).
The market is watching U.S. President Donald Trump’s trip to the Gulf. He kicked off the visit Tuesday with an appearance at an investment forum in Riyadh, where he announced that the U.S. would lift longstanding sanctions on Syria and secured a $600 billion pledge from Saudi to invest in the U.S.
Rystad Energy’s global head of commodity markets Mukesh Sahdev said that preventing oil price spikes over the summer travel season will be a key part of the president’s agenda on the trip, adding that the U.S. could take advantage of lower prices to buy more Middle East crude for its Strategic Petroleum Reserve.
“The big unknown for the market is how U.S. actions related to Iran, Russia and Venezuela will result in supply disruptions or additions,” Sahdev said.
