Oil climbs for seventh day as trade talks fuel demand optimism
Oil rallied for a seventh day as US negotiators touted progress in trade talks with China and investors gained faith that OPEC will shrink output.
Futures increased as much as 3% to almost $50 a barrel in New York on Tuesday.
Talks with China are "going very well," US President Donald Trump said in a tweet as the delegations in Beijing extended their meeting into Wednesday. Meanwhile, US crude inventories probably declined last week, easing worries about a glut.
"The market is clearly rebounding from sharply oversold territory," said Michael Tran, commodities strategist at RBC Capital Markets LLC.
"The macro outlook looks and feels a lot less dire than it did just a couple of weeks ago."
The last time crude rallied for this long was the summer of 2017. In the last seven sessions, oil advanced more than 11%, erasing December’s loss.
Confidence is growing that the Organisation of Petroleum Exporting Countries (OPEC) and allied producers will start pledged production cuts this month, led by Saudi Arabia.
West Texas Intermediate for February delivery traded up 2.5% to $49.71 at 12:21 local time.
Brent for March settlement gained $1.32 to $58.65 on the ICE Futures Europe Exchange in London. The global benchmark crude traded at an $8.59 a barrel premium to WTI for the same month.
The America-China trade talks are showing signs of progress. The US administration on Monday expressed optimism it can reach a "reasonable" trade deal, and Trump has given Trade Representative Robert Lighthizer until March 1 to negotiate an accord.
"There’s a confluence of factors helping – a big driver is progress in trade talks and hopes that global growth will be supported," said Stephen Innes, head of trading for Asia Pacific at Oanda Corporation.
"Fed’s easier stance and OPEC’s commitment to cut production, as well as expectations that inventories should drop are lending a hand to this positive investor sentiment."
American crude stockpiles probably declined by 2.7 million barrels last week, according to the median estimate in a Bloomberg survey of analysts ahead of government data on Wednesday.
Nationwide inventories are near their lowest level in almost two months.
"Saudi Arabia will continue to be the decisive factor for the markets this year, just as they were last year," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.
"They can be very convincing when they choose to be. And so we see the potential for Brent crude to go to $70 a barrel over the course of the year."