Oil advanced above $64 a barrel after Chinese President Xi Jinping’s conciliatory tone in a closely watched speech raised hopes that U.S.-China trade tensions may ease, lifting global risky assets.
Futures in New York erased earlier losses in the day to rise as much as 1.5 percent as Xi vowed to open sectors from banking to auto manufacturing, increase imports and lower foreign-ownership limits. That came after U.S. President Donald Trump expressed optimism on reaching a deal with China. Markets from global equities to metals gained on expectations that a trade war between the world’s two largest economies can be averted.
Oil has struggled after touching a high of more than $66 a barrel in March as investors worry that tit-for-tat tariff increases between the U.S. and China could impact wider economic growth and curb energy demand. Record level of U.S. crude production also counters efforts by the Organization of Petroleum Exporting Countries and its allies to curb output and drain a global glut.
“All risk assets are rallying after President Xi’s speech as the Chinese leader expresses greater openness,” said Will Yun, a commodities analyst at Hyundai Futures Corp. “Investors’ sentiment is turning positive as China’s willingness to open up the market gives confidence to the global economy and it could lead to better demand.”
West Texas Intermediate for May delivery rose as much as 96 cents to $64.38 a barrel on the New York Mercantile Exchange, and was at $64.29 as of 3:10 p.m. in Singapore. The contract climbed $1.36, or 2.2 percent, to $63.42 on Monday. Total volume traded was about 50 percent above the 100-day average.
Brent for June settlement was 91 cents higher at $69.56 a barrel on the London-based ICE Futures Europe exchange. The contract on Monday rose $1.54, or 2.3 percent, to $68.65. The global benchmark crude traded at a $5.29 premium to June WTI, the widest since March 29.
Yuan-denominated futures for September delivery were 2.8 percent higher at 413.5 yuan a barrel on the Shanghai International Energy Exchange. The contract rose 8 yuan to 402.3 yuan a barrel on Monday.
The Chinese leader pledged a “new phase of opening up” and said Cold War and zero-sum mentalities were “out of place” in his keynote address Tuesday to the Boao Forum for Asia. The long-planned speech was being closely watched by traders for any response to Trump’s plan to hit hundreds of Chinese products with duties in an escalating trade spat. Following Xi’s speech, Asian stocks and U.S. futures jumped in Asian morning trading.
In the oil market, U.S. crude inventories were forecast to fall by 1.5 million barrels last week in a Bloomberg survey before U.S. government data on Wednesday. That would be a second consecutive week of declines after a surprise drop of 4.6 million barrels last week. — Bloomberg