Oil prices rose on Tuesday on hopes that U.S.-Chinese talks in Beijing would bring a halt to trade disputes between the world’s biggest economies, while OPEC-led supply cuts tightened markets.
International Brent crude futures were at $57.77 per barrel at 0113 GMT, up 44 cents, or 0.8 percent from their last close.
U.S. West Texas Intermediate (WTI) crude oil futures were at $48.85 per barrel, up 33 cents, or 0.7 percent.
U.S. Commerce Secretary Wilbur Ross said late on Monday that Beijing and Washington could reach a trade deal that “we can live with” as dozens of officials from the world’s two largest economies held talks in a bid to end their trade dispute that has roiled global markets since last year.
Asian stock markets rose as investors hope Washington and Beijing will reach some sort of agreement.
Despite optimism around the talks in Beijing, some analysts warned that the relationship between Washington and Beijing remained on shaky grounds, and that tensions could flare up again soon.
“We remain concerned about the world’s most important bilateral relationship,” political risk consultancy Eurasia Group said in its 2019 outlook.
“The U.S. political establishment believes engagement with Beijing is no longer working, and it’s embracing an openly confrontational approach … (and) rising nationalist sentiment makes it unlikely that Beijing will ignore U.S. provocations,” Eurasia Group said.
Beyond politics, oil markets are being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC member Russia.
“Crude oil prices have benefited from OPEC production cuts and steadying equities markets,” said Mithun Fernando, investment analyst at Australia’s Rivkin Securities.
Looming over the OPEC-led cuts, however, is a surge in U.S. oil supply, driven by a steep rise in onshore shale oil drilling and production.
As a result, U.S. crude oil production rose by a whopping 2 million barrels per day (bpd) last year to a world record 11.7 million bpd.
With drilling activity still high, most analysts expect U.S. oil production to rise further this year.
Consultancy JBC Energy said it was likely that U.S. crude oil production was already “significantly above 12 million bpd” by early January.