Oil edges up as investors focus on Trump-Xi meeting in Beijing

[LONDON] Oil prices edged up on Thursday, with market participants focused on the meeting between US President Donald Trump and Chinese President Xi Jinping to scour for progress on a resolution for the Iran war.

Both leaders agreed in a meeting that the Strait of Hormuz must be open for the free flow of energy, according to a White House readout of the summit on Thursday.

Brent crude futures were up 98 cents, or 0.9 per cent, to US$106.61 a barrel at 0916 GMT, while US West Texas Intermediate futures added 81 cents, or 0.8 per cent, to US$101.83.

Both contracts fell on Wednesday as investors worried about possible US interest rate hikes as higher fuel prices spur inflationary pressures. Brent crude futures lost more than US$2 a barrel, while WTI futures dropped more than US$1.

Xi told Trump that trade talks were making progress at the start of the two-day summit on Thursday, but warned that disagreement over Taiwan could send relations down a dangerous path.

“Oil prices are in a wait-and-see mode,” ING analysts said in a note on Thursday, adding that the market could be pinning too much hope on the US-China talks yielding some positive results on the US-Israeli war on Iran.

The Strait of Hormuz, a key energy gateway, has been largely shut since the war broke out at the end of February.

“Failure to make meaningful progress on reopening the strait could leave the US with few options other than renewed military action,” IG analyst Tony Sycamore said in a note.

Iran, meanwhile, appears to have tightened its control over the strait, cutting deals with Iraq and Pakistan to ship oil and liquefied natural gas from the region.

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Trump, Xi agree Strait of Hormuz must stay open, White House says

Oil edges up ahead of Trump-Xi meeting in Beijing

A Chinese supertanker carrying 2 million barrels of Iraqi crude sailed through the strait on Wednesday after being stranded in the Gulf for more than two months.

A Panama-flagged crude oil tanker managed by Japanese refining group Eneos has also passed through the strait, ship-tracking data from LSEG showed on Thursday, the second instance of a Japan-linked oil ship making it through.

Global oil supply will fall short of total demand this year as inventories are drained at an unprecedented pace, the International Energy Agency said on Wednesday.

Meanwhile in the US, crude inventories fell by 4.3 million barrels to 452.9 million barrels for the week ended May 8 on rising exports, the EIA said, although distillates stockpiles rose, in opposition to expectations of a draw. REUTERS