SINGAPORE: Oil prices rose on Wednesday, holding slightly above recent four-year lows, as investors focused on US-China trade talks and signs of lower US production.
Brent crude futures climbed 61 cents a barrel, or around 1 percent, to $62.76 a barrel by 12:09 p.m. Saudi time, while US West Texas Intermediate crude was up 71 cents, or 1.2 percent, at $59.8 a barrel.
Both benchmarks plunged to a four-year low recently after OPEC+’s decision to speed up output increases, stoking fears of oversupply at a time when US tariffs have increased concerns about demand.
“News that the US and China will start trade talks this weekend has Brent crude trading higher, extending a relief rally in oil,” said commodities strategists at ING on Wednesday.
“Yet while negotiations would help improve sentiment in the oil market, we’ll need to see significant progress on lowering tariffs to improve the demand outlook,” ING added.
Meanwhile, lower oil prices in recent weeks have prompted some US energy firms including Diamondback Energy and Coterra Energy to announce rig reductions, which analysts said should support prices over time by reducing output.
The latest announcements suggested output will weaken in the coming months, said ANZ Bank senior commodity strategist Daniel Hynes. “We warned last month that falling prices and declining drilling activity was raising the risk of US oil output falling.”
Crude stocks fell by 4.5 million barrels in the week ended May 2, market sources said, citing American Petroleum Institute figures on Tuesday.
US government data on stockpiles is due at 5:30 p.m. Saudi time. Analysts polled by Reuters expect, on average, an 800,000 barrel decline in US crude oil stocks for last week.
Prices also drew support from signs of demand improving. Consumers in China increased spending during the May Day celebration and as market participants returned after the five-day holiday.
In Europe, companies are expected to report growth of 0.4 percent in first-quarter earnings, an improvement over the 1.7 percent drop analysts had expected a week ago.
The Federal Reserve is widely expected to leave US interest rates unchanged on Wednesday as tariffs roil the economic outlook.
