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Oil prices rose in volatile trade on Tuesday supported by expectations of a drawdown in US crude inventories, though gains were capped by worries about a recession and uncertainty over a China-US trade deal.
Brent crude settled up 81 cents, or 1.4%, at $59.51 a barrel. US West Texas Intermediate crude ended $1.29, or 2.4%, higher at $54.93 a barrel.
Prices extended gains in post-settlement trade, with Brent touching a high of $59.88 and WTI hitting $55.45, after data from the industry group the American Petroleum Institute showed US crude inventories fell more than expected.
US crude stockpiles fell sharply last week as imports dropped, plummeting 11.1 million barrels, compared with expectations for a 2-million barrel draw. The US government's weekly report is due to be released Wednesday morning.
The draw in inventories amid strong refining runs is lending strength to crude prices, overriding concerns that trade tensions could weigh on demand, said Bob Yawger, director of energy futures at Mizuho in New York.
During the session, the oil market had oscillated in response to swings on Wall Street, which was hurt by a fall in financial stocks, while revived worries about a US recession overshadowed early optimism of a resolution to the prolonged trade dispute between the world's two largest economies.
US President Donald Trump said on Monday that he believed China was sincere about wanting to reach a deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through “calm” negotiations.
On Tuesday, however, concerns about trade resurfaced after China's foreign ministry that it had not heard of any recent telephone call between the United States and China on trade, and said it hopes Washington can stop its wrong actions and create conditions for talks.
Crude oil prices have fallen by about 20% from 2019 highs reached in April, partly because of worries that the US -China trade war is hurting the global economy, which could dent demand for oil.
China's Commerce Ministry last week said it would impose additional tariffs of 5% or 10% on 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.
In retaliation, Trump said he was ordering US companies to look at ways to close operations in China and make products in the United States.
“A relative sense of calm has been restored, but it is simply impossible to know how long it will last,” said oil broker PVM's Tamas Varga.
“Any market optimism will only prevail when the ink has dried on a new US -China trade agreement”.
The measures are prompting reactions from Chinese companies, with Sinopec seeking a tariff exemption for importing US oil in the coming months, sources told Reuters .
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