(Bloomberg) -- Oil rallied on Tuesday as plans for a meeting between the U.S. and China offered a hint of progress in the trade war dividing the world's two biggest economies.
Futures in New York shook off their earlier malaise and shot up 1% to close trading. Crude joined an advance for equity markets on word that senior U.S. officials will be in China next Monday for the first high-level, face-to-face trade negotiations since talks broke down in May. The recovery pushed prices to their third straight daily gain.
Oil built upon its gains later in the day after the American Petroleum Institute was said to report a 10.96 million barrel drop in U.S. crude inventories last week, bigger than all 13 analyst estimates in a Bloomberg survey. The U.S. Energy Department is due to release official inventory numbers on Wednesday.
“Some of the soft demand numbers we've had in the last few months have definitely been the impact of the trade war,” said Leo Mariani, a KeyBanc Capital Markets Inc. analyst. “There's been reticence in doing much until there's more clarity on how that will end.”
See also: Big Oil's Dealmaking CEO Spends Billions to Ride Out Turmoil
U.S. Trade Representative Robert Lighthizer and a small team will be in Shanghai through Wednesday, according to people familiar with the plans who asked not to be identified. The meeting is expected to involve a broad discussion of trade issues, a senior administration official said.
West Texas Intermediate for September delivery closed 55 cents higher at $56.77 a barrel on the New York Mercantile Exchange. It climbed to $57.03 at 4:45 p.m., after the API report.
Brent for September settlement rose 57 cents to close at $63.83 on the ICE Futures Europe Exchange and later reached $64.13 a barrel.
Until the trade news, futures were little-changed for much of the day amid uncertainty about demand and potential supply disruptions in the Middle East. Consultant FGE earlier cut global oil demand growth forecasts through the end of 2020. European nations, meanwhile, discussed new security measures for the Strait of Hormuz after Iran seized a British-flagged tanker in the world's most critical chokepoint for crude exports.
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--With assistance from James Thornhill, Saket Sundria and Grant Smith.
To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net
To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Catherine Traywick, Carlos Caminada
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