Mubasher: Oil futures saw gains on Wednesday, buttressed by re-ignited hopes for a trade pact between the US and China, and expectations of economic stimulus measures by the European Central Bank (ECB), Reuters reported.
In addition, geopolitical tensions in the Middle East after crude carrier attack near the strategic Strait of Hormuz lent support to oil markets.
By 8:13 am GMT, US Nymex crude futures rose by 0.26% to $54.04 per barrel (pb), after surging by 3.8% on Tuesday, while global benchmark Brent futures climbed by 0.27% to $62.31 pb, having gained 2% in the earlier session.
US President Donald Trump announced that preparations were being made for his anticipated meeting with his Chinese counterpart Xi Jinping at the Group of 20 (G20) summit in Japan next week.
In addition, ECB President Mario Draghi on Tuesday said that the central bank would loosen policy again, if inflation failed to pick up, marking a policy reversal as the trade conflict threatened his stimulus efforts.
“It looks like the market is a little bit stunned by the big turnaround in sentiment [on the oil price outlook],” Sydney-based CMC Markets chief strategist Michael McCarthy was quoted by Reuters.
Draghi’s remarks were seen as the major catalyst, with its significance as far as global economic growth is concerned, McCarthy suggested.
Nevertheless, figures from Japan indicated that the trade-reliant economy’s exports declined for a sixth consecutive month last May, weighing on the market.
The situation in the Middle East remained strained, following last week’s attack on two oil carriers in the Gulf of Oman, with the latest Trump threat to take a military action to prevent Iran from making a nuclear bomb.
However, he left the door open for whether he would sanction the use of force to protect oil shipments in the Gulf.
Worries over a potential confrontation between the US and Iran escalated since last week’s tanker attack, which Washington blamed on Tehran.
Markets are also anticipating a meeting between the Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia, in which it would be decided to roll over previously agreed supply cuts through the second half of the year.
Members of the producer club and non-affiliated partners, also known as the OPEC+ alliance, are eyeing 10-12 July as a date for their policy meeting in Vienna, Reuters reported, citing sources from the group.
Despite stating that the meeting will be held on 25 and 26 June, OPEC itself however was weighing a 1-2 July meeting, sources said.
In addition, US crude stockpiles went down by 812,000 barrels per day (bpd) last week to 482 million bpd, the American Petroleum Institute (API) said on Tuesday.
Official data pertaining to the weekly change in oil inventories will be released later in the day.
