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Oil prices rose to their highest in seven weeks on Wednesday as U.S. President Donald Trump said a deal had been done with China, heightening expectations of a de-escalation in trade tensions between the world's two largest economies.
Brent crude futures were up $1.15, or 1.7%, to $68.02 a barrel at 1249 GMT, while U.S. West Texas Intermediate crude was up $1.31, or 2%, to $66.29. At that level, WTI reached its highest in more than two months.
Trump said Beijing would supply magnets and rare earth minerals and the U.S. will allow Chinese students in its colleges and universities. Trump added the deal is subject to final approval by him and President Xi Jinping.
The trade-related downside risk in oil has been temporarily removed, although the market reaction has been tepid as it is not clear how economic growth and global oil demand will be affected, PVM analyst Tamas Varga said.
Meanwhile, Trump said he was less confident that Iran would agree to stop uranium enrichment in a nuclear deal with Washington, according to an interview released on Wednesday.
For its part, Iran threatened to strike U.S. bases in the Middle East if nuclear negotiations fail and conflict arises with the United States.
Ongoing tension with Iran means its oil supplies are likely to remain curtailed by sanctions.
Supplies will increase though as OPEC+ plans to increase oil production by 411,000 barrels per day in July as it looks to unwind production cuts for a fourth straight month.
"Greater oil demand within OPEC+ economies – most notably Saudi Arabia – could offset additional supply from the group over the coming months and support oil prices," said Capital Economics' analyst Hamad Hussain in a note.
In the U.S., consumer prices increased less than expected in May, deepening the conviction in financial markets that the Federal Reserve will start cutting interest-rate cuts by September. Lower interest rates can spur economic growth and demand for oil.
Later on Wednesday, markets will focus on the weekly U.S. oil inventories report from the Energy Information Administration.
U.S. crude oil stocks fell by 370,000 barrels last week, according to market sources who cited American Petroleum Institute figures on Tuesday.