LONDON: Oil prices extended gains on Tuesday, buoyed by US-China trade talks and a dip in Saudi Arabian crude supply to China.
Brent crude futures rose 23 cents, or 0.3 percent, to $67.27 a barrel by 03:31 p.m. Saudi time, hovering near their highest since April 28.
US West Texas Intermediate crude was up 17 cents, or about 0.3 percent, at $65.46, near highs reached on April 4.
US-China trade talks were set to continue for a second day in London as top officials aimed to ease tensions that have expanded from tariffs to rare earth minerals, risking global supply chain disruptions and slower growth.
“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.
Prices have recovered as demand concerns have faded with the trade talks between Washington and Beijing and a favorable US jobs report, while there are risks to North American supply from wildfires in Canada, Goldman Sachs analysts said.
US President Donald Trump said on Monday that the talks with China were going well and he was “only getting good reports” from his team in London.
A trade deal between the two nations could support the global economic outlook and boost demand for oil and other commodities.
On the supply side, allocations to Chinese refiners showed that Saudi Arabian 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.
OPEC+, which pumps about half of the world’s oil and includes OPEC members and allies such as 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 in oil output was limited, with Iraq pumping below target to compensate for earlier overproduction and Saudi Arabia and the United Arab Emirates making smaller increases than agreed.
“The prospect of further hikes in OPEC supply continues to hang over the market,” ANZ senior commodity strategist Daniel Hynes said in a note.
Elsewhere, Iran said it would soon make a counter-proposal for a nuclear deal in response to a US offer that Tehran deems “unacceptable,” while Trump made clear that the two sides remained at odds over whether the country would be allowed to continue enriching uranium on Iranian soil.
Iran is the third-largest OPEC producer and any easing of US sanctions on Iran would allow it to export more oil, weighing on global prices.