Oil rallied as signs the US-China trade war may ease outweighed concerns about increased OPEC+ crude output.
West Texas Intermediate rose 0.8% to settle above $63 a barrel after China’s official news agency reported that Presidents Donald Trump and Xi Jinping spoke over the phone. The conversation is injecting optimism that the leaders will find an off-ramp to a trade dispute that has threatened economic growth and fuel demand.
“A meeting between Xi and Trump is supportive of risk assets and crude oil as it raises the prospect of progress on tariff negotiations,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Tariff uncertainty has been a key overhang for crude markets, with unresolved tensions prompting downward revisions to demand forecasts.”
Still, animosity between the world’s two largest economies is adding to unease about the US shale patch. China avoided buying American crude for a second straight month, the longest run since the pandemic, a negative for American producers that partly depend on overseas demand.
Traders are also bracing for potential near-term crude supply crunch. Wildfires in Canada have disrupted almost 350,000 barrels of daily oil output from the country, potentially limiting flows to the storage hub at Cushing, Oklahoma, and export terminals on the US Gulf Coast. In the US, crude inventories fell by 4.3 million barrels last week, the most since November, data from the Energy Information Administration showed.
Limiting crude’s gains, Saudi Arabia wants the Organization of the Petroleum Exporting Countries and its allies to continue to add at least 411,000 barrels a day of output in August and potentially September, according to people familiar with the matter. Yet rising fuel demand during the summer could help the market absorb those extra barrels.
Crude has fallen about 12% this year on fears a US-led trade war will sap economic growth and energy demand. Earlier this week, President Trump had been calling for talks on tariffs with Xi Jinping, who seemed to be reluctant to go ahead with high-level negotiations at this stage.
Meanwhile, Saudi Aramco cut the price of its main oil grade to buyers in Asia for loading next month, but by less than the reduction signaled in a Bloomberg survey.
Prices
WTI for July delivery rose 0.8% to settle at $63.37 a barrel in New York.
Brent for August settlement rose 0.7% to settle at $65.34 a barrel.
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