Oil rises on optimism about US-China talks easing trade tensions
LONDON: Oil prices climbed on Tuesday as investors awaited the outcome of U.S.-China trade talks and as Saudi Arabia's crude supply to China is set to dip slightly.
Brent crude futures rose 34 cents, or 0.5%, to $67.38 a barrel by 1045 GMT. U.S. West Texas Intermediate crude was up 33 cents, or 0.5%, at $65.62.
On Monday, Brent had risen to $67.19, the highest since April 28, buoyed by the prospect of a U.S.-China trade deal.
U.S.-China trade talks were set to continue for a second day in London as top officials aimed to ease tensions that have expanded from tariffs to rare earth curbs, risking global supply chain disruptions and slower growth.
'There's a sense of optimism around these trade talks, the market is waiting to see what this will produce and that is supporting prices,' said Harry Tchilinguirian, group head of research at Onyx Capital Group.
Prices have recovered as demand concerns have faded with the trade talks between Washington and Beijing and a favourable U.S. jobs report, while there are risks to North American supply due to wildfires in Canada, Goldman Sachs analysts said.
Saudi Arabia cuts July oil prices to Asia to 4-year low after OPEC+ supply boost
U.S. President Donald Trump said on Monday that the talks with China were going well and he was 'only getting good reports' from his team in London.
A trade deal between the U.S. and China could support the global economic outlook and boost demand for commodities including oil.
Saudi Arabia's state oil firm Saudi Aramco will ship about 47 million barrels to China in July, a tally of allocations to Chinese refiners showed, 1 million barrels less than June's allotted volume, Reuters reported.
'The Saudi allocations could be an early sign that OPEC+'s unwind may not actually mean that much additional supply,' Tchilinguirian said. 'After all these unwinds, one would have thought that we would be getting more from the country that can produce more.'
OPEC+, which pumps about half of the world's oil and includes OPEC members and allies such as Russia, put forward plans for an increase of 411,000 barrels per day for July as it looks to wrestle back market share and punish over-producers. It is set to unwind production cuts for the fourth straight month.
A Reuters survey found that OPEC oil output rose in May, although the increase was limited as Iraq pumped below target to compensate for earlier overproduction and Saudi Arabia and the United Arab Emirates made smaller hikes than allowed.
'The prospect of further hikes in OPEC supply continues to hang over the market,' Daniel Hynes, senior commodity strategist at ANZ, said in a note.
Elsewhere, Iran said it would soon hand a counter-proposal for a nuclear deal to the U.S. in response to a U.S. offer that Tehran deems 'unacceptable', while Trump made clear that the two sides remained at odds over whether the country would be allowed to continue enriching uranium on Iranian soil.
Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries and any easing of U.S. sanctions on Iran would allow it to export more oil, weighing on global crude prices.
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