Oil prices rose more than 3% on Tuesday after the United States said it will remove some products from its China tariff list, easing concerns over a global trade war that has pummeled the market in recent months.
U.S. West Texas Intermediate (WTI) futures were up $1.38, or 2.5%, at $56.31.
Brent crude futures were up $1.75, or 3.1%, from the previous settlement at $60.32 a barrel by 1357 GMT. The international benchmark has lost more than 20% since hitting its 2019 high in April.
The U.S. dollar index jumped and bond yields also turned higher after the U.S. Trade Representative said some products were being removed from the China tariff list.
Oil prices see-sawed earlier in the day, caught between demand worries and rising global supplies and expectations for deeper production cuts from leading producers.
U.S. oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September to a record 8.77 million bpd, the Energy Information Administration forecast in a report.
“The big test now is whether the shale producers can keep growing production at these lower price levels,” said Callum Macpherson, head of commodities at Investec.
“This could be the start of a re-adjustment process from the artificially high prices OPEC is implicitly trying to maintain down to something more in line with the marginal shale production costs,” Macpherson said.
Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries, last week said it planned to keep its crude exports below 7 million bpd in August and September to help to drain global oil inventories.
The kingdom’s plan to float its national oil company Saudi Aramco in what could be the world’s largest initial public offering (IPO) gives it further impetus to boost prices.
“With Saudi Aramco reportedly eyeing an IPO once again, there is some support to the idea that Saudi Arabia has a heightened interest in strong crude prices and will cut its own output accordingly,” Vienna-based consultancy JBC Energy said.
OPEC and its allies, known as OPEC+, have agreed to cut 1.2 million bpd of production since Jan. 1.