NEW YORK: Oil prices edged up 1% to a seven-week high on Tuesday on hopes trade talks between the U.S. and China - the world’s two biggest economies - will result in a deal that could support global economic growth and boost oil demand.
Brent crude futures rose 81 cents, or 1.2%, to $67.85 a barrel by 11:22 a.m. EDT (1522 GMT), while U.S. West Texas Intermediate crude rose 83 cents, or 1.3%, to $66.12.
Those gains pushed both crude benchmarks into technically overbought territory for the first time since early April and put Brent on track for its highest close since April 17 and WTI on track for its highest close since April 3.
U.S. Commerce Secretary Howard Lutnick said trade talks with China were going well as the two sides met for a second day in London, seeking a breakthrough on export controls that have threatened a fresh rupture between the superpowers.
“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.
On the supply side, allocations to Chinese refiners showed that Saudi Arabia’s state oil company Saudi Aramco will ship about 47 million barrels of oil to China in July, 1 million barrels less than June’s allotted volume, Reuters reported.
The Saudi allocations could be an early sign that the unwinding of OPEC+ production cuts might not result in much additional supply, Tchilinguirian said.
Saudi Arabia cuts July oil prices to Asia to 4-year low after OPEC+ supply boost
OPEC+, which pumps about half of the world’s oil and includes the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, put forward plans for an output increase of 411,000 barrels per day (bpd) for July as it looks to unwind production cuts for a fourth straight month.
A Reuters survey found that OPEC’s May increase to oil output was limited, with Iraq, the second biggest OPEC producer behind Saudi Arabia, pumping below target to compensate for earlier overproduction, and Saudi Arabia and the United Arab Emirates making smaller increases than agreed.
Elsewhere, Iran said it would soon make a counter-proposal for a nuclear deal in response to a U.S. offer that Tehran deems “unacceptable”, while U.S. President Donald Trump made clear that the two sides remained at odds over whether Tehran would be allowed to continue enriching uranium on Iranian soil.
Iran is the third-largest OPEC producer and any easing of U.S. sanctions on Tehran should allow Iran to export more oil, which should reduce crude prices.
In Europe, meanwhile, the European Commission proposed an 18th package of sanctions against Russia for its invasion of Ukraine, aimed at Moscow’s energy revenues, banks and military industry.
Russia was the world’s second biggest crude producer in 2024 behind the U.S., and any increase in sanctions will likely keep more of that oil out of global markets, which could support oil prices.
US oil inventories and exports
The American Petroleum Institute (API) trade group and the U.S. Energy Information Administration (EIA) are due to release U.S. oil inventory data on Tuesday and Wednesday, respectively.
Analysts forecast energy firms added about 0.1 million barrels of oil to U.S. stockpiles during the week ended June 6.
If correct that would be the first storage increase in three weeks and compares with an increase of 3.7 million barrels during the same week last year and an average increase of 2.8 million barrels over the past five years (2020-2024).
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