Oil prices rose more than 1% on Tuesday after U.S. President Donald Trump predicted a trade deal with China following positive comments by Beijing, calming concerns raised by an earlier round of tit-for-tat tariff hikes.
Brent crude LCOc1 was up 61 cents, or 1.04%, at $59.31 a barrel by 1405 GMT. U.S. West Texas Intermediate crude futures CLc1 were up 70 cents, or 1.3%, at $54.34.
Trump said on Monday that he believed China was sincere about wanting to reach a deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through “calm” negotiations.
“While ‘de-escalation’ and the expectation of a temporary truce in the trade war may be what is lifting sentiment and oil prices this morning, the resolution of the U.S.-China trade rift will take time,” said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.
“Oil prices appear to be getting a reprieve from the past week’s U.S. and Chinese announcements of retaliatory trade measures.”
Crude oil prices have fallen by about 20% from 2019 highs reached in April, partly because of worries that the U.S.-China trade war is hurting the global economy, which could dent demand for oil.
China’s Commerce Ministry last week said it would impose additional tariffs of 5% or 10% on 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.
In retaliation, Trump said he was ordering U.S. companies to look at ways to close operations in China and make products in the United States.
“A relative sense of calm has been restored, but it is simply impossible to know how long it will last,” said oil broker PVM’s Tamas Varga.
“Any market optimism will only prevail when the ink has dried on a new U.S.-China trade agreement”.
The measures are prompting reactions from Chinese companies, with Sinopec seeking a tariff exemption for importing U.S. oil in the coming months, sources told Reuters.
Meanwhile, U.S. crude oil and gasoline inventories are expected to have fallen last week, while distillate stockpiles were seen higher, a Reuters poll showed on Monday.
Five analysts polled by Reuters estimated, on average, that crude inventories fell by 2.1 million barrels in the week to Aug. 23.