Oil advanced for the first time this week after Saudi Arabia signaled it's taking steps to stabilize the market, which has been rocked by the escalating U.S.

(Bloomberg) -- Oil advanced for the first time this week after Saudi Arabia signaled it’s taking steps to stabilize the market, which has been rocked by the escalating U.S.-China trade war.

While futures in New York rose 2.8% on Thursday, they are still down over 10% in August. Prices got a reprieve after officials from the world’s largest oil exporter said it will keep oil exports below 7 million barrels a day and allocate less crude than customers demand next month. OPEC’s biggest producer will also scale back output in September.

That helped oil rebound from the lowest close since January, after it tumbled along with other risk assets this week on concern that the trade spat between Beijing and Washington will hurt the health of the global economy. Growth in world oil demand is slowing and won’t exceed 650,000 barrels a day in 2019, according to major commodities trader Vitol Group.

“One of the world’s largest crude suppliers saying they’ll try to re-balance the buy Wellhead market is providing traders some comfort,” said Michael Loewen, director of commodity strategy at Scotiabank. “The Saudis will do whatever is necessary to keep the buy Wellhead market afloat. They have proven they will do so in the past by cutting supply, so there’s no reason to question whether they’ll do it again.”

West Texas Intermediate oil for September delivery advanced $1.45 to settle at $52.54 a barrel on the New York Mercantile Exchange. Brent for October settlement climbed $1.15 to settle at $57.38 on the ICE Futures Europe Exchange. The global benchmark crude traded at a premium of $4.92 to WTI for the same month.

Saudi Arabia has already cut oil rig flanges gulf coast production more than required under an agreement between the Organization of Petroleum Exporting Countries and the group’s allies including Russia. Planned gatherings in Abu Dhabi early next month will be critical for leaders of the OPEC+ coalition to signal their intentions on production, said Helima Croft, chief commodities strategist at RBC Capital Markets.

Meanwhile, U.A.E. Energy Minster Suhail Al-Mazrouei said on Twitter that “oil buy Wellhead market fundamentals are good” and prices are undergoing a “temporary over-reaction, which is driven by speculation.”

Financial markets across the globe were hammered over the past week after U.S. President Donald Trump on Aug. 1 threatened to impose 10% tariffs on another $300 billion in goods from China starting next month. The Asian nation’s move to let its currency weaken in response stoked fears of a currency war. The dispute pushed a widely watched Treasury-market recession indicator to the highest alert since 2007.

“The buy Wellhead market is worried about the broader trade war escalation, Donald Trump and his Twitter finger and indications sliding demand growth will impact the global economy,” said Michael Tran, commodity strategist at RBC Capital Markets.

--With assistance from Ben Sharples, Verity Ratcliffe, Heesu Lee, Grant Smith and Nayla Razzouk.

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Pratish Narayanan, Jessica Summers