Published: Fri, June 21, 2019
Markets | By Otis Pena

Oil gains amid Middle East tensions, U.S.-China trade deal hopes

Oil gains amid Middle East tensions, U.S.-China trade deal hopes

According to the EIA report, crude stocks in the USA declined by 1.3 million barrels in the previous week, while expectations were for a decline by 1.1 million barrels.

Brent for August settlement fell 41 cents to US$61.73 a barrel on London's ICE Futures Europe Exchange, after closing 2% higher on Tuesday.

Followed by Trump's tweet, crude prices had begun to gather pace despite a stubborn rise in U.S. inventories, while sending more 1000 U.S. troops to Middle East had raised red flags over the Gulf and added to concerns of potential supply disruption through the strategically significant Strait of Hormuz.

WTI crude oil prices climbed more than one percent higher to go up to $54.55 per barrel after the EIA reported a surprising fall in United States crude stockpiles last week. Separately, the USA and China said their leaders will meet in Japan next week to relaunch trade talks.

Oil prices rose on Wednesday after hit in the last session, hopes for the world's two largest economies, the United States and China trade spat and the possibility for dispute in the Middle East between the US and Iran after the attacks a week ago.

US West Texas Intermediate crude futures were down 28 cents, or 0.5 per cent, at 51.65 dollars. Trump had repeatedly threatened more tariffs if Xi spurned the opportunity to talk.

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European Central Bank President Mario Draghi also offered a boost, saying on Tuesday that the central bank would ease policy again if inflation failed to accelerate.

Oil rose after Iran said it shot down a USA spy drone in its airspace, stoking Middle East tensions further after the attack on two tankers last week, while a more dovish stance from the Federal Reserve lifted financial markets. Washington blamed Tehran, which has denied any role.

Both oil benchmarks gave up earlier gains in the Asian session after data showed that Japan's exports fell for a sixth straight month in May as China-bound shipments weakened, underlining the impact of the trade war.

OPEC and its allies will discuss whether to extend a deal on cutting 1.2 million barrels per day of production that runs out this month.

Oil prices had risen earlier in the day supported by signs of improving demand in the United States, an agreement between OPEC and other producers on a date for a meeting to discuss output cuts and signs that the USA and China were resuming talks to resolve a trade war that is threatening global growth.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc.

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