A possibility that OPEC-led supply cuts could be extended also supported prices.
U.S. West Texas Intermediate (WTI) crude oil futures ended Tuesday’s session up $1.26, or 2.6 percent, at $49.78 per barrel. International Brent crude futures gained $1.29, or 2.3 percent, to $58.62 per barrel by 2:26 p.m. ET.
“The trade situation is definitely bullish; you have a good demand construction if we can wrap up this trade deal,” said Bob Yawger, director of futures at Mizuho in New York.
The talks are going well so far and will continue on Wednesday, U.S. delegation member Steven Winberg said.
On Monday, U.S. Commerce Secretary Wilbur Ross said there was a “very good chance” of reaching a settlement, while China’s foreign ministry said Beijing had the “good faith” to resolve the dispute.
Some analysts warned, however, that the relationship between Washington and Beijing remained shaky and that tensions could soon flare anew.
“Surely, there will be more twists and turns in the saga and increasing U.S. tariffs on Chinese goods after March from 10 percent to 25 percent cannot be excluded,” Tamas Varga of PVM Oil Associates said. “For now, however, optimism prevails.”
There is also concern that a worldwide economic slowdown will dent fuel consumption, leading the hedge fund industry to cut significantly its bullish positions in crude futures.
Oil traders also worried that a possible worldwide economic slowdown could dent fuel consumption. The hedge fund industry has cut significantly its bullish positions in crude futures.
S&P Global Ratings said it had lowered its average oil price forecasts for 2019 by $10 per barrel to $55 for Brent and $50 per barrel for WTI.
Crude prices so far in 2019 have been buoyed by supply cuts from OPEC including top exporter Saudi Arabia, as well as non-member Russia.
Saudi-based Arab Petroleum Investments Corp, a firm specializing in funding petroleum projects, estimated in a report on Tuesday that oil prices are likely to trade at $60 to $70 per barrel by mid-2019.
Looming over the OPEC-led cuts is a surge in oil supply from the United States, now the world’s top producer, driven by a steep rise in onshore shale drilling.
U.S. crude production rose 2 million barrels per day (bpd) last year to a world record 11.7 million bpd.
With drilling activity still high, most analysts expect U.S. oil production to rise further this year.