Oil hits $70 as China offers soothing words on trade

LONDON: Oil hit $70 a barrel on Tuesday, in its biggest two-day rally in nearly a month, as investors grew more confident that a brewing trade dispute between the United States and China may be resolved without causing harm to the global economy.

Brent crude futures were last up $1.35 at $70.00 a barrel by 1418 GMT, while West Texas Intermediate crude futures  rose $1.30 to $64.72 a barrel.

President Xi Jinping on Tuesday promised to open China's economy further and lower import tariffs, striking a conciliatory tone on the trade tensions between China and the United States.

Equities and industrial commodities rose, while perceived safe-havens such as gold and U.S. Treasuries came under pressure, reflecting confidence among traders and investors that a trade war is increasingly unlikely.

The oil price has risen by 4.5 percent in the last two trading days to reach its highest since March 29 and is only 1.2 percent below the 2018 peak at $71.05 from late January.

"It's not so much 'risk on/risk off', as it is 'trade war on/trade war off' and, at the moment, we're 'trade-war off'," London Capital Group's Jasper Lawler said.

"There's a lot of political motivation in the tariffs in the United States, but ultimately, they won't want a trade war, there is a general desire to boost the U.S. economy."

Concerns of a prolonged trade dispute between the world's two biggest economies and uncertainty over the supply and demand balance of global oil markets have made for volatile trading in the last few weeks.

Oil briefly rose above $70 two weeks ago, after Saudi Arabia vowed it would keep an agreement in place to limit supply into next year. But the U.S. decision to impose tariffs on $50 billion of Chinese goods a week later sent the price to a two-week low.

Oil markets have been supported by healthy demand and supply cuts led by the Organization of the Petroleum Exporting Countries.

However, soaring U.S. crude production, which has jumped by a quarter since mid-2016, threatens to undermine OPEC's efforts.

The American Petroleum Institute will publish storage data later on Tuesday while the U.S. Energy Information Administration releases its monthly report on U.S. production.

"The latest monthly estimates will come out this week with the EIA leading the pack, publishing its Short-Term Energy Outlook this afternoon," PVM Oil Associates strategist Tamas Varga said.

"The EIA said that U.S. crude oil output is chiefly the function of price. If this is the case, then no downward revision is anticipated today."