It goes without saying that global anxiety about growth is inextricably linked to oil prices.

Tuesday presented a classic case as oil price surged 4.7 percent, the biggest percentage gain since December, after the US said it would delay a 10-percent tariff on some Chinese products that was scheduled to kick in next month, thereby easing trade tensions.

Oil’s relief rally exceeded the bounce of industrial metals such as copper, which are usually more growth-sensitive assets.

However, oil prices fell on Wednesday morning over a rise in US crude inventories and disappointing economic data from China, including a surprise drop in industrial output growth to a more than 17-year low. But how are oil prices likely to develop in the long run in the face of trade politics?

"We are sceptical and stick to our view that the trade conflict has escalated and that the latest batch of tariffs will bear economic costs, not least as difficult-to-substitute consumer goods remain affected," said, Norbert Ruecker, Head of Economics and Next Generation Research at Julius Baer.

"This morning’s Chinese industrial production came in below expectations confirming our expectation that the late-cycle dent likely becomes deeper before year end. Oil demand should continue to soften. Both gasoline and diesel use in the United States dropped below last year’s levels," he added. 

Julius Baer has trimmed its forecast and now sees oil heading towards $60 per barrel on a 3-month and $55 on a 12-month horizon.

According to a UK-based FXTM analyst, oil prices have scope to push higher as easing trade tensions reduce fears over slowing global growth and staggering demand for crude.

"The improving market mood should also support WTI Crude with prices trading around $56.35 per barrel as of writing.  The daily close above $56.50 should encourage a move higher towards $57.43," said, Lukman Otunuga, senior research analyst at FXTM.

(Writing by Seban Scaria seban.scaria@refinitiv.com; editing by Daniel Luiz)

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