Crude oil prices climbed for a second straight session on Wednesday, advancing more than 2% as supply fears tied to sanctions and global tensions overshadowed recent weakness in demand. Optimism surrounding a potential U.S.-China trade agreement added an extra tailwind to the rally.
As of 06:45 GMT, Brent futures rose $1.24, or 2.0%, to $62.56 a barrel, while U.S. West Texas Intermediate gained $1.20, or 2.1%, to $58.44.
Earlier in the week, oil had sunk to a five-month low, weighed down by rising output and concerns that prolonged trade tensions would further dampen consumption. But the market turned higher as geopolitical uncertainty intensified.
The postponement of a planned summit between U.S. President Donald Trump and Russian President Vladimir Putin — along with growing pressure from Western governments on Asian refiners to curb imports of Russian crude — reignited concerns over potential disruptions to global supply.
“Despite the overall bearish sentiment driven by an oil supply glut and weak demand, the risk of supply disruption in hotspots like Russia, Venezuela, Colombia and the Middle East remains in place and prevents oil prices staying below the $60 handle,” said Mukesh Sahdev, founder and CEO of energy consultancy XAnalysts.
Market analysts said part of the rally reflected traders covering short positions. “After the sell-off in crypto (currency), regional banks and now gold and silver, I think we are seeing position reductions across markets, which for crude oil means short covering,” said Tony Sycamore, market analyst at IG Australia.
Rising tensions between the U.S. and Venezuela also remained in focus. A group of independent United Nations experts condemned U.S. strikes on Venezuelan vessels in international waters as “extrajudicial executions.” Trump has ordered similar actions in recent months against ships suspected of narcotics trafficking as part of an effort to counter what he called a “narcoterrorist” threat.
On the demand side, hopes of progress in trade negotiations between Washington and Beijing lent additional support. Officials from both countries are set to meet this week in Malaysia. Trump said on Monday he expects “a fair trade deal” with Chinese President Xi Jinping, but tempered expectations Tuesday, saying “maybe it won’t happen.”
U.S. inventory data also contributed to the bullish tone. The American Petroleum Institute reported declines in crude, gasoline, and distillate stocks last week, while the United States Department of Energy announced plans to buy one million barrels to replenish the Strategic Petroleum Reserve. Analysts at Australia and New Zealand Banking Group said this move added further support to prices.