Crude oil prices edged up on Tuesday on optimism U.S.-China trade tensions will ease and on hopes major economies will take stimulus measures to ward off a potential economic slowdown that could hit oil demand.
Brent crude LCOc1 had risen 8 cents to $59.82 a barrel by 0652 GMT, after climbing 1.88% on Monday. U.S. crude CLc1 was up 9 cents at $56.30 a barrel, after gaining 2.44% in the previous session.
The price appreciation for Brent is still below Nigeria’s budget benchmark of $60 a barrel, meaning the country will face cash crisis in implementing the 2019 budget.
Oil prices edged up as United States said it would extend a reprieve that permits China’s Huawei Technologies to buy components from U.S. companies, signalling a slight softening of the trade conflict between the world’s two largest economies.
The extension sets a very “comforting tone” ahead of next month’s U.S.-China trade talks, Stephen Innes, managing partner of VM Markets, said in a note.
“The U.S.-China trade spat has been at the centre of the oil market demise, which has sent the global economy to the brink of recession and negatively impacted oil demand forecasts,” he said.
A rally in equity markets around the world on growing expectations that global economies will take action against slowing growth also supported crude prices.
China’s new lending reference rate was set slightly lower on Tuesday after the central bank announced interest rate reforms designed to reduce corporate borrowing costs, while Germany’s right-left coalition government said it would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession.
Meanwhile, a Reuters poll of seven analysts revealed expectations that crude oil inventories in the United States fell by 1.9 million barrels in the week to Aug. 16.
The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA), an agency of the U.S. Department of Energy.
“An unexpected rise, (could) possibly (take) the wind out of oil’s sails, if only temporarily,” said Jeffrey Halley, a senior market analyst at OANDA.
The API is scheduled to release its data on Tuesday.
Still, prices were weighed down by a report from the Organisation of the Petroleum Exporting Countries (OPEC) that stoked concerns about oil demand growth.
Traders were also watching for signs of tension in the Middle East after the United States called the release of an Iranian tanker at the centre of a confrontation between Iran and Washington unfortunate, warning Greece and Mediterranean ports against helping the vessel.