Oil rises as hopes grow for US-China trade breakthrough

Oil prices rose on Tuesday after U.S. President Donald Trump predicted a trade deal with China after positive comments by Beijing, calming nerves after a round of tit-for-tat tariff hikes had sent markets reeling.

Brent crude was up 32 cents, or 0.55%, at $59.02 a barrel by 0850 GMT, after falling 1% in the previous session, dropping for the third day in a row.

U.S. West Texas Intermediate crude futures were up 36 cents, or 0.67%, at $54 a barrel, having also dropped 1% on Monday for the fourth day of decline.

Trump on Monday said he believed China was sincere about wanting to reach a deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through "calm" negotiations, settling global markets.

"While 'de-escalation' and the expectation of a temporary truce in the trade war may be what is lifting sentiment and oil prices this morning, the resolution of the U.S.-China trade rift will take time," said Harry Tchilinguirian, global oil strategist at BNP Paribas in London.

"Oil prices appear to be getting a reprieve from the last week's U.S. and Chinese announcements of retaliatory trade measures."

Oil prices have fallen around 20% from 2019 highs reached in April, in part because of worries that the U.S.-China trade war is hurting the global economy, which could dent demand for oil.

China's Commerce Ministry said last week it would impose additional tariffs of 5% or 10% on 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.

In retaliation, Trump said he was ordering U.S. companies to look at ways to close operations in China and make products in the United States.

Investors are "in thrall to the president's comments, with financial markets doing abrupt changes of direction on his words that wouldn't look out of place in a 'Fast and the Furious' film", said Jeffrey Halley, senior market analyst at OANDA.

The measures are prompting reactions from Chinese companies, with Sinopec seeking a tariff exemption for importing U.S. oil in the coming months, sources told Reuters.

Meanwhile, U.S. crude oil and gasoline inventories are expected to have fallen last week, while distillate stockpiles were seen higher, a Reuters poll showed on Monday.

Five analysts polled by Reuters estimated, on average, that crude inventories fell by 2.1 million barrels in the week to Aug. 23.