SINGAPORE: Oil prices pushed higher for a second day on Wednesday, rising by about 2%, buoyed by sanctions-related supply risks and hopes of a U.S.-China trade deal.
Investors also digested news that the U.S. is seeking oil for delivery to its strategic reserves.
Brent crude futures rose $1.24, or 2.0%, to $62.56 a barrel as of 0645 GMT, while U.S. West Texas Intermediate crude futures climbed $1.20, or 2.1%, to $58.44.
Oil had weakened to a five-month low on Monday as producers pumped more supply while trade tensions threatened to blunt demand.
But supply concerns flared again on news that a summit between U.S. President Donald Trump and Russian President Vladimir Putin was put on hold, and on disruption fears as Western governments pressured Asian buyers to reduce their purchases of Russian oil.
“Despite the overall bearish sentiment driven by an oil supply glut and weak demand, the risk of supply disruption in hotspots like Russia, Venezuela, Colombia and the Middle East remains in place and prevents oil prices staying below the $60 handle,” said Mukesh Sahdev, founder and CEO of energy market consultancy XAnalysts.
Market strength on Wednesday was also driven by some short covering activity from traders, said Tony Sycamore, a market analyst at IG Australia.
“After the sell-off in crypto (currency), regional banks and now gold and silver, I think we are seeing position reductions across markets, which for crude oil means short covering,” Sycamore said.
Investors also monitored tensions between the U.S. and Venezuela, a key oil producer.
U.S. strikes against Venezuela in international waters are a dangerous escalation and amount to “extrajudicial executions,” a group of independent United Nations experts said on Tuesday.
In recent months, U.S. President Donald Trump has ordered strikes on at least six vessels in the Caribbean that the U.S. suspected of transporting narcotics, as part of a campaign against a “narcoterrorist” threat emanating from Venezuela.
Investors are also closely watching the progress of U.S.-China trade talks as officials from both countries are set to meet this week in Malaysia.
Trump said on Monday he expects to work out a fair trade deal with Chinese President Xi Jinping, whom he been expected to to meet in South Korea next week. But on Tuesday Trump again added to the uncertainty over the meeting, saying that “maybe it won’t happen”.
U.S. crude, gasoline and distillate stocks fell last week, market sources said, citing American Petroleum Institute figures on Tuesday.
Oil also found support on a U.S. plan to refill strategic reserves, ANZ research analysts said in a client note on Wednesday.
The U.S. Department of Energy said on Tuesday it aims to buy 1 million barrels of crude oil for the Strategic Petroleum Reserve, as it seeks to take advantage of relatively low oil prices to help replenish its stockpile.
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