Oil up as market watches US-China trade talks

Oil prices climbed on Tuesday as investors awaited the outcome of US-China talks that could pave the way for easing trade tensions and improve fuel demand.

Brent crude futures rose 28 cents, or 0.4%, to $67.32 a barrel by 0330 GMT. US West Texas Intermediate crude was up 23 cents, or 0.4%, at $65.52.

On Monday, Brent had risen to $67.19, the highest since April 28, buoyed by the prospect of a US-China trade deal.

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 curbs, risking global supply chain disruptions and slower growth.

Prices have recovered as demand concerns have faded with the trade talks between Washington and Beijing and a favourable US jobs report, while there are risks to North American supply due to 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 US and China could support the global economic outlook and boost demand for commodities including oil.

Elsewhere, Iran said it would soon hand a counter-proposal for a nuclear deal to the US 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 producer among members of the Organization of the Petroleum Exporting Countries and any easing of US sanctions on Iran would allow it to export more oil, weighing on global crude prices.

Meanwhile, a Reuters survey found that OPEC oil output rose in May, although the increase was limited as Iraq pumped below target to compensate for earlier overproduction and Saudi Arabia and the United Arab Emirates made smaller hikes than allowed.

OPEC+, which pumps about half of the world’s oil and includes OPEC members and allies such as Russia, is accelerating its plan to unwind its most recent layer of output cuts.

“The prospect of further hikes in OPEC supply continues to hang over the market,” Daniel Hynes, senior commodity strategist at ANZ, said in a note.

“A permanent shift to a market driven strategy (in OPEC) would push the oil market into a sizeable surplus in H2 2025 and almost surely lead to lower oil prices.”