Oil prices pushed higher for a second day on Wednesday, by more than 1%, buoyed by sanctions-related supply risk and hope of a U.S.-China trade deal while investors also digested news of the U.S. seeking oil for delivery to its strategic reserves.
Brent crude futures rose 94 cents, or 1.5%, to $62.26 a barrel as of 0400 GMT, while U.S. West Texas Intermediate crude futures climbed 92 cents, or 1.6%, to $58.16.
Oil has bounced off a five-month low that was hit on Monday as producers pumped more supply while trade tension blunted demand.
Supply risk arose from news overnight that a summit between U.S. President Donald Trump and Russian President Vladimir Putin was put on hold as well as disruption fear fuelled by Western pressure on Asian buying of Russian oil.
“Despite the overall bearish sentiment driven by an oil supply glut and weak demand, the risk of supply disruption in hotspots like Russia, Venezuela, Colombia and the Middle East remains in place and prevents oil price staying below the $60 handle,” said Mukesh Sahdev, founder and CEO of energy market consultancy XAnalysts.
Investors also monitored tension between the U.S. and Venezuela, a key oil producer.
U.S. strikes against Venezuela in international waters are a dangerous escalation and amount to “extrajudicial executions,” a group of independent United Nations experts said on Tuesday.
In recent months, U.S. President Donald Trump has ordered strikes on at least six vessels in the Caribbean that the U.S. suspected of transporting narcotics, as part of a campaign against a “narcoterrorist” threat emanating from Venezuela.
Investors are also closely watching the progress of U.S.-China trade talks as officials from both countries are set to meet this week in Malaysia.
Trump said on Monday he expects to work out a fair trade deal with Chinese President Xi Jinping, whom he plans to meet in South Korea next week.
“Trump’s trade negotiation comments are likely providing some support to the market. Further support is likely coming from the cancellation of the Trump-Putin summit,” said ING commodities strategists on Wednesday.
U.S. crude, gasoline and distillate stocks fell last week, market sources said, citing American Petroleum Institute figures on Tuesday.
Oil also found support on a U.S. plan to refill strategic reserves, ANZ research analysts said in a client note on Wednesday.
The U.S. Department of Energy said on Tuesday it aims to buy 1 million barrels of crude oil for delivery to the Strategic Petroleum Reserve, as it seeks to take advantage of relatively low oil prices to help replenish its stockpile.
(Reporting by Siyi Liu and Jeslyn Lerh in Singapore; Editing by Muralikumar Anantharaman and Christopher Cushing)