Oil prices have risen as the market shifts focus to the possibility of increased Chinese demand, drawing attention away from oversupply worries and trade tensions between China and the United States.
Brent crude settled 38 cents higher on Tuesday at $US73.44 a barrel, after it reached a session high of $US74.
US West Texas Intermediate (WTI) settled up 63 cents, or nearly one per cent, to settle at $US68.52.
Earlier in the day, WTI reached a high of $US69.05.
Reports that China will increase infrastructure spending helped lessen fears that US-China trade tensions will reduce the country’s demand for oil, said Phil Flynn, analyst at Price Futures Group in Chicago.
‘That’s going to be very bullish for oil demand,’ Flynn said. ‘Infrastructure spending from China in the past had really jacked up oil demand, and I think that’s adding some outside support for prices.’
After an eight per cent decline from multi-year highs, buyers returned to the market, said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.
The supply-and-demand picture will remain favourable unless there are significant production increases from Russia and Saudi Arabia, McGillian said, because strong global growth has led to notable reductions in crude inventories.
US crude stocks fell last week by 3.2 million barrels, according to the American Petroleum Institute.
The larger-than-expected draw caused futures to rise in post-settlement trade, with US crude at $US68.73 a barrel.
Inventories were forecast for a 2.3 million-barrel draw last week, according to a Reuters poll. Stockpiles at Cushing were expected to fall for the 10th consecutive week, traders said.
The commitments from Russia and Saudi Arabia to increase production, along with easing supply disruptions in Libya and decreases in global refiner demand continue to weigh on prices, said Jim Ritterbusch, president of Ritterbusch and Associates.
Sentiment has been driven by fears that supply could be disrupted by confrontation in the Middle East or that Washington’s trade dispute with major trading partners could dampen global growth.
Iran, OPEC’s third-largest producer, which pumps 3.75 million barrels per day, has come under increasing US pressure, with the administration of President Donald Trump pushing countries to cut all imports of Iranian oil beginning in November.
Saudi Arabia and other large producers are ramping up output to offset likely losses as the November deadline approaches.
Meanwhile, US crude inventories at the US crude futures delivery hub at Cushing, Oklahoma rose in the four days to Friday, according to data supplier Genscape, traders said.