Brent rises on prospects of US-China talks

The front-month ICE Brent contract has risen by $1.77/bbl on the day, to trade at $61.89/bbl at 09.00 GMT.

IMAGE: Getty Images

Upward pressure:

China's Commerce Ministry has recently announced that it is evaluating a proposal from the US to hold talks aimed at resolving President Donald Trump's broad tariffs, signalling a possible easing of trade tensions, according to Reuters.

This development has raised hopes for a de-escalation in the ongoing trade war between the world's two largest economies and top oil consumers.

“Fresh hope of a thaw in the US-China trade war" has "helped extend a… bounce” in oil prices, noted Vanda Insights founder and analyst Vandana Hari.

At the same time, Trump’s threats to impose sanctions on buyers of Iranian oil have added to the upward pressure on oil prices.

“Crude oil prices rebounded as the spectre of more sanctions on Iran raised fears of tighter supplies. President Trump said that any nation or person that buys oil or petrochemicals from Iran will be subject to secondary sanctions,” said Daniel Hynes, senior commodity strategist at ANZ Bank.

In addition, the US Energy Information Administration (EIA) reported a 2.7 million-bbl draw in US commercial crude inventories, defying the American Petroleum Institute’s (API) estimate of a 3.8 million-bbl build, further contributing to the price increase.

Downward pressure:

Eight OPEC+ members—Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman—have agreed to speed up the easing of voluntary production cuts, raising their combined output by 411,000 b/d in May. This marks a significant increase from the previously planned boost of 135,000 b/d.

The expectation of additional supply from OPEC+ has put some downward pressure on oil prices.

By Tuhin Roy

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