Early on Tuesday, WTI crude oil prices are trading slightly bearish after the optimism surrounding tightening of supplies helped them rise above the key level of $40 for the first time since March. At the time of writing, WTI crude oil is trading at around $40.46 per barrel.

On Monday, crude oil prices enjoyed support from the latest reports about oil rig counts falling to record lows in the US and Canada, even as demand was expected to rise in the wake of economies reopening around the world. News about leading oil producers looking to tighten supply gave a further boost to oil prices and helped WTI crude settle above $40 for the first time since the pandemic struck.

However, the sentiment in financial markets has deteriorated once again after recent comments from Peter Navarro, White House trade adviser, alluding to a breakdown of the US-China trade deal. According to Navarro, the US government blaming China for mishandling information about the coronavirus outbreak initially has driven relations between the two countries to the lowest point in several years.

A renewed focus on US-China tensions even as the global economy tries to recover from the impact of the pandemic has sent crude oil prices lower in early trading on Tuesday. Re-escalation of trade tensions could disrupt global supply chains and capital flows and make economic recovery harder, not just for the US and China, but for other countries around the world as well.