Crude oil prices settled higher on Tuesday as investors reassessed expectations of a looming glut and sought clarity on the trade dispute between the US and China, the world’s two biggest oil consumers.
Brent crude futures rose by 31 cents or 0.5 per cent to settle at $61.32 a barrel, while the US West Texas Intermediate (WTI) crude futures appreciated by 30 cents or 0.5 per cent to $57.82 per barrel.
Record oil production in the US and the decision by the Organisation of the Petroleum Exporting Countries and allies (OPEC+) to press ahead with planned supply hikes raised expectations of oversupply.
The US-China trade dispute has also increased anticipation that a slowdown in global economic growth will curb oil demand.
However, both sides have made some efforts to downplay the disagreement, which has given support to prices which had hit a five-month low previously.
US President Donald Trump, who is set to meet China’s Xi Jinping in South Korea next week, said on Monday he expects to reach a fair trade deal with his counterpart.
He said that the US commands “great respect” from China and that he will reach a “fantastic deal” with the Chinese President, following a move by the Asian country to expand export controls on rare earth products that are used in smartphones, fighter jets, electric vehicles, and more
Market analysts noted that any failure to reach some agreement raises the risk of destabilizing not only relations between the two superpowers but also the global economy.
The International Energy Agency (IEA) earlier this month forecast that a surplus next year would lead to a strongly upward-sloped futures curve, called super contango. This is where prices for immediate supply are lower than for later delivery, which typically indicates that near-term supply is abundant and demand is declining.
The American Petroleum Institute (API) estimated that crude oil inventories in the US fell by 2.980 million barrels in the week ending October 17. Inventories in the US are so far still showing a net loss for the year, losing 2.423 million barrels.
Gasoline (petrol) inventories also saw a decrease of 236,000 barrels in the week ending October 17, after rising by 2.99 million barrels in the week prior, and distillate inventories rounded out the losses in the reporting period, losing 974,000 barrels, on top of the week prior’s 4.79-million-barrel drawdown.
Official data from the US Energy Information Agency (EIA) will be released later on Wednesday.