Oil prices edged higher on Tuesday as investors focused on the signing of a preliminary trade deal between the United States and China, the world’s top oil consumers, and on expectations of a drawdown in U.S. crude oil inventories.
However, price gains were capped by receding Middle East tensions, with both Tehran and Washington desisting from any further escalation after this month’s clashes.
Brent crude was up 16 cents, or 0.3%, at $64.36 per barrel by 0301 GMT after falling 1% on Monday. U.S. West Texas Intermediate crude futures were up 13 cents, or 0.2%, at $58.21 a barrel.
“Oil prices are modestly rebounding, following four days of intense selling,” said Edward Moya, analyst at brokerage OANDA, pointing to trade-deal optimism and fading concerns over the U.S.-Iran conflict.
“Oil prices are tentatively rebounding after seller exhaustion kicked in as investors await the next developments on the trade front and as earnings season begins.”
Oil prices were supported ahead of the signing at the White House on Wednesday of a Phase 1 trade deal, which marks a major step in ending a dispute that has cut global growth and dented demand for oil.
Still, with traders already pricing in the signing of the deal, there is more downside risk to prices, said Michael McCarthy, chief market strategist at CMC Markets.
“Regardless whether the deal is signed, we might have a buy the rumours, sell the fact scenario unfolding,” he added.
Separately, U.S. crude oil inventories were expected to have fallen last week, a preliminary Reuters poll showed on Monday, helping to boost prices.
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.
China’s crude oil imports in 2019 grew by nearly 10 percent from the previous year on demand growth from new mega-refineries, customs data showed.
Elsewhere, Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said his country will work for oil market stability at a time of heightened U.S.-Iranian tension and wants to see sustainable prices and demand growth.
Oil prices surged to their highest in almost four months after a U.S. drone strike killed an Iranian commander on Jan. 3 and Iran retaliated with missiles launched against U.S. bases in Iraq. But they slumped again as Washington and Tehran retreated from the brink of direct conflict last week.
Prince Abdulaziz said it was too early to talk about whether the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, would continue with production curbs set to expire in March.