Oil prices climbed to their highest levels in more than two months Wednesday, as investors reacted to renewed trade optimism between the U.S. and China and a sharper-than-expected decline in U.S. crude inventories.
Brent crude futures rose $1.32, or 1.97%, to $68.19 a barrel. U.S. West Texas Intermediate gained $1.51, or 2.32%, to $66.49, both benchmarks hitting their highest marks since early April. WTI earlier traded near $65.50 following a rally sparked by a combination of bullish geopolitical and supply signals.
The gains followed a statement from President Donald Trump, who said, "Our deal with China is done, subject to final approval with President Xi and me." Trump added that the agreement includes provisions for China to supply rare earth materials and for the U.S. to accept Chinese students at American universities.
Tamas Varga, analyst at PVM Oil, said, "The trade-related downside risk in oil has been temporarily removed," but noted that broader economic implications remain uncertain.
Meanwhile, the U.S. Energy Information Administration reported a weekly crude inventory decline of 3.6 million barrels to 432.4 million, significantly exceeding analysts' forecasts of a 2 million barrel draw. Gasoline product supplied, a demand proxy, rose by 907,000 barrels per day to 9.17 million bpd.
"It's a bullish report," said Bob Yawger, director of energy futures at Mizuho, citing strengthening gasoline demand.
Geopolitical tensions in the Middle East also added to market anxiety. Trump, in an interview released Wednesday, expressed skepticism over Iran's willingness to halt uranium enrichment. Iran has threatened to strike U.S. bases in the region if nuclear talks collapse.
Iranian supply remains constrained by U.S. sanctions, although the Organization of the Petroleum Exporting Countries and allies (OPEC+) plan to increase output by 411,000 barrels per day in July. Hamad Hussain of Capital Economics said, "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."
