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Oil rises as hopes grow for US-China trade breakthrough
[LONDON] Oil prices rose on Tuesday after US President Donald Trump predicted a trade deal with China after positive comments by Beijing, calming nerves after a round of tit-for-tat tariff hikes had sent markets reeling.
Brent crude was up 69 US cents, or 1.2 per cent, at US$59.39 a barrel by 1110 GMT, after falling 1 per cent in the previous session, dropping for a third day in a row.
US West Texas Intermediate crude futures were up 74 US cents, or 1.4 per cent, at US$54.38, having also dropped 1 per cent on Monday for a fourth daily decline.
Mr Trump on Monday said he believed China was sincere about wanting to reach a deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through "calm" negotiations, settling global markets.
"While 'de-escalation' and the expectation of a temporary truce in the trade war may be what is lifting sentiment and oil prices this morning, the resolution of the US-China trade rift will take time," said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.
"Oil prices appear to be getting a reprieve from the past week's US and Chinese announcements of retaliatory trade measures."
Oil prices have fallen by about 20 per cent from 2019 highs reached in April, partly because of worries that the US-China trade war is hurting the global economy, which could dent demand for oil.
China's Commerce Ministry last week said it would impose additional tariffs of 5 per cent or 10 per cent on 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.
In retaliation, Mr Trump said he was ordering US companies to look at ways to close operations in China and make products in the United States.
"A relative sense of calm has been restored, but it is simply impossible to know how long it will last," said Tamas Varga of oil broker PVM.
"Any market optimism will only prevail when the ink has dried on a new US-China trade agreement".
The measures are prompting reactions from Chinese companies, with Sinopec seeking a tariff exemption for importing US oil in the coming months, sources told Reuters.
Meanwhile, US crude oil and gasoline inventories are expected to have fallen last week, while distillate stockpiles were seen higher, a Reuters poll showed on Monday.
Five analysts polled by Reuters estimated, on average, that crude inventories fell by 2.1 million barrels in the week to Aug 23.