Oil up on trade tension easing

Oil prices rose more than $1 a barrel yesterday, after US President Donald Trump said he would hold an extensive meeting with Chinese President Xi Jinping at the G20 summit later on this month.

Tensions in the Middle East after last week’s tanker attacks, with the US planning to send more troops to the Middle East, also lent support.

US West Texas Intermediate crude futures rose $1.75, or 3.4%, to $53.68 a barrel. Brent crude rose $1.07, or 1.8%, to $62.01 a barrel.

“Had a very good telephone conversation with President Xi of China.

We will be having an extended meeting next week at the G-20 in Japan.

Our respective teams will begin talks prior to our meeting,” Mr Trump tweeted.

The Chinese side has not confirmed a meeting would take place. Chinese state media said Xi agreed to the meeting and emphasised in the call that economic and trade disputes should be solved through dialogue.

“Right now, this is a rumour-driven market,” said Gene McGillian, vice-president of market research at Tradition Energy.

There’s the expectation that if you are able to reach a trade resolution, it would help global economic growth and, therefore, oil demand.

Market participants are also awaiting a meeting between the Organisation of the Petroleum Exporting Countries and other producers including Russia, a group known as OPEC+, to decide whether to extend a supply reduction pact that ends this month.

OPEC and non-OPEC states are discussing holding meetings on July 10-12 in Vienna, a date range proposed by Iran.

Russian Energy Minister Alexander Novak said it was too early to make any decisions about the future of the agreement because of market uncertainties.

Oil prices have fallen by more than 15% from April’s 2019 highs, partly because of concerns over the US-China trade war and disappointing economic data.

High US crude stockpiles, partly due to growing domestic production, has also weighed on the market. Commercial stocks were at their highest since July 2017 and about 8% above the five-year average for this time of year, according to government data last week.

After two consecutive weeks of unexpected builds, US crude stocks were forecast to have dropped by two million barrels last week.

- Reuters