Oil prices rose on Monday after the United States and China both suggested they could ease up in a trade war that has undermined the outlook for the global economy and crude demand.
U.S. oil was up 54 cents, or 1%, at $54.71 a barrel by 1200 GMT, while brent was up 38 cents, or 0.64%, at $59.72 a barrel.
U.S. President Donald Trump said on Monday he believed China was seeking a trade deal after he said Beijing contacted U.S. officials overnight to say it wanted a return to dialogue, adding on Twitter: “talks are continuing!”
Chinese Foreign Ministry spokesman Geng Shuang said he had not heard about a phone call between the two sides.
China’s top negotiator, Vice Premier Liu He, had earlier said Beijing was willing to solve the impasse through “calm” negotiations and opposed an escalation.
Concerns for the global economy have increased as trade tensions between Beijing and Washington mounted in recent days.
China’s Commerce Ministry said last week it would impose additional tariffs of 5% or 10% on a total of 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.
In retaliation, Trump said he was ordering U.S. companies to look at ways to close operations in China and make products in the United States.
SEB analyst Bjarne Schieldrop said the oil market was worried about “the secondary global growth effects of an upwards spiralling trade war between China and the U.S.”
“The second concern for the oil market is that … China is now ready to wrestle with the U.S. in the global space of oil”.
Investors were also left guessing about whether interest rates in the United States might be cut soon.
U.S. Federal Reserve chair Jerome Powell told a symposium the U.S. economy was in a “favourable place” and the Federal Reserve would “act as appropriate” to keep the economic expansion on track.
But concerns about a possible recession were exacerbated by data showing U.S. manufacturing industries registered their first month of contraction in almost a decade.
The Brent/WTI spread was at minus $5.26, after widening 60 cents to settle at minus $5.17 on Friday. The spread blew out after China included U.S. oil in its tariff moves.
U.S. energy companies cut the most oil rigs in about four months last week, with the rig count falling to the lowest since January 2018, as producers cut spending on new drilling and completions.