SINGAPORE (Reuters) – Oil prices rose more than 1% on Tuesday as traders betting on falling prices bought back contracts to lock in profits after declines over the last three sessions due to the escalating trade tensions between China and United States.

Crude oil is dispensed into a bottle in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration

Brent prices plunged more than 8% in the three sessions from their close on July 31, with U.S. President Donald Trump vowing to impose new tariffs on Chinese imports, and China making further moves against U.S. agricultural imports.

The United States also responded to a decline in the Chinese yuan on Monday by branding the country a currency manipulator later in the day.

Brent fell more than 3% on Monday as traders worried the ongoing trade dispute between the world’s two biggest oil buyers would dent demand, helping to prompt Tuesday’s short-covering.

International benchmark Brent crude futures LCOc1 climbed 61 cents, or 1%, to $60.42 a barrel by 0544 GMT on Tuesday after earlier dipping to $59.07, the lowest since Jan. 14.

West Texas Intermediate (WTI) crude CLc1 futures rose 56 cents, or 1%, to $55.25 per barrel.

“This is a more likely a correction from oversold doom and gloom positions,” said Stephen Innes, managing partner at VM Markets. “But with commodity markets in total disarray, this move should not be confused with a ‘risk-on’, especially in oil markets as the latest trade war escalation is flat out harmful to global growth and by extension, for oil markets.”

The United States accused Beijing of manipulating its currency after China let the yuan drop to its lowest in more than a decade. The weaker yuan would support Chinese exports by making them cheaper, but it would also raise oil-import costs for the world’s biggest importer.

The People’s Bank of China’s firmer-than-expected yuan fixing on Tuesday helped pull the currency away from the recent lows, as did an announced bond sale in the offshore market.

Concerns that the U.S.-China trade conflict has entered a phase of retaliatory action was weighing on sentiments in the oil market, which for the moment is taking less notice of tensions in the Middle East, analysts said.

Iran on Monday said it will no longer tolerate “maritime offences” in the Strait of Hormuz, a day after it seized a second oil tanker that it accused of smuggling fuel.

Oil prices may find some support later this week with a preliminary Reuters poll showing U.S. crude oil inventories were expected to fall for an eighth consecutive week.

us china trade war

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