Oil Rises After Xi’s Speech on Optimism U.S.-China Spat May Ease

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 risk assets around the world.

Futures in New York erased earlier losses 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.

“There seems to be a slightly more conciliatory tone coming from both sides at the moment,” Neil Atkinson, head of the oil markets and industry division at the International Energy Agency, said in a Bloomberg television interview.

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 hurt wider economic growth and curb energy demand. Record U.S. crude production is also threatening efforts by the Organization of Petroleum Exporting Countries and its allies to curtail output and drain a global glut.

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 $64.21 as of 10:47 a.m. London time. The contract climbed 2.2 percent to $63.42 on Monday. Total volume traded Tuesday was about 37 percent above the 100-day average.

Brent for June settlement was up 85 cents at $69.50 a barrel on the London-based ICE Futures Europe exchange, after advancing 2.3 percent on Monday. The global benchmark crude traded at a $5.33 premium to June WTI, the widest since March 29.

Yuan-denominated futures for September delivery rose 2.4 percent to 410.1 yuan a barrel on the Shanghai International Energy Exchange.

Xi’s Speech

The Chinese leader pledged a “new phase of opening up” and said Cold War and zero-sum mentalities were “out of place,” giving his keynote address Tuesday to the Boao Forum for Asia. The long-planned speech was 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 may have fallen by 1.5 million barrels last week, according to a Bloomberg survey before government data on Wednesday. That would be a second week of declines after a surprise drop of 4.6 million barrels a week earlier.

Other oil-market news:

Oil inventories may be back at their five-year average — the level targeted by OPEC — in two to three months, the IEA’s Atkinson said. Simmering tensions and a possible trade war between the U.S and China pose yet more risk to oil consumption, already threatened by rising crude prices, according to industry consultants FGE. The head of China’s largest natural-gas importer believes the country’s energy ties with the U.S. are set to deepen, despite trade tensions that have roiled financial markets. BNP Paribas SA recommends a short position on WTI’s June-December spread and long on Brent’s June-December amid expectation that a divergence in time spreads will persist, according to Harry Tchilinguirian, its head of commodity-markets strategy.