Oil prices climbed more on Tuesday, amid continuing trade negotiations between the U.S. and China and a decrease in crude shipments from Saudi Arabia to China. Brent increased by 23 cents, or 0.3%, to $67.27 a barrel. U.S. West Texas Intermediate rose 17 cents and settled at $65.46.
On the second day of the recent trade talks in London, top officials of both countries are trying to send positive signals to alleviate tensions. Optimistic reports from these meetings fueled sentiment in the financial markets and pushed oil prices higher. The U.S. President said trade talks were "going well" and received a positive response from negotiators.
Supply limitations were also a factor in the price rise. Saudi Arabia is likely to ship around 47 million barrels of oil to China in July, which is almost a million barrels less than that of last month. The decision signals a conservative view on boosting supply even as oil-producing countries map out a plan to unwind output cuts.
Oil prices had already risen last week on a variety of global factors. Plains wildfires in Canada posed a threat to North American supply, and renewed tensions with Iran and a slower-than-expected rise in production among Organization of the Petroleum Exporting Countries deepened uncertainty. The group had said it would increase production by 411,000 barrels a day for July, though production increases in May were small. Iraq and Saudi Arabia, among other countries, fell below expectations.
Meanwhile, some analysts warned that producers have increased production capacity, which could lead to additional supply entering the market in the coming months. While current gains are driving the market for now, there is a risk of oversupply toward the end of the year if demand growth fails to keep pace with rising output.
Elsewhere, Iran said it would present a counterproposal within the coming weeks in reaction to a U.S. proposal for reviving the nuclear agreement, which has been deemed 'unacceptable' by Tehran. Disagreements over major stumbling blocks, including allowing Iranian self-enrichment of uranium, continue.
As the third-largest OPEC oil-producing country, any lifting of U.S. sanctions potentially could permit Iran's resumption of oil sales—potentially pushing global supply into the market and thereby putting downward pressure on prices.
Overall, the oil market remains sensitive to both diplomatic progress and supply decisions.
