Oil rises after Xi's speech on optimism U.S.-China spat may ease

By Sharon Cho and Heesu Lee on 4/10/2018

SINGAPORE and SEOUL (Bloomberg) -- Oil advanced above $64/bbl 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% 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/bbl 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/bbl on the New York Mercantile Exchange, and was at $64.21 as of 10:47 a.m. London time. The contract climbed 2.2% to $63.42 on Monday. Total volume traded Tuesday was about 37% above the 100-day average.

Brent for June settlement was up 85 cents at $69.50/bbl on the London-based ICE Futures Europe exchange, after advancing 2.3% 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% 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 MMbbl 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 MMbbl a week earlier.

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