Oil settles higher on trade optimism

Brent crude futures gained 52 cents, or 0.8%, to settle at $64.92 a barrel

Oil prices rose on Wednesday after data showed U.S. crude and fuel inventories drew down more than expected last week, and as U.S. President Donald Trump’s optimistic tone over upcoming talks with Chinese President Xi Jinping helped ease economic jitters.

Brent crude futures gained 52 cents, or 0.8%, to settle at $64.92 a barrel, while U.S. West Texas Intermediate crude futures added 33 cents, or 0.6%, to end at $60.48.

U.S. crude oil, gasoline and distillate fuel stockpiles each dropped more last week than analysts had expected, data from the U.S. Energy Information Administration (EIA) showed on Wednesday.

Crude oil stocks declined by nearly 7 million barrels, the data showed, far exceeding the 211,000-barrel drop that was forecast.

The big decline forced a reassessment of expectations that the oil market is headed for a large surplus, with the OPEC+ group raising output and U.S. production at record levels.

Where’s the glut? Price Futures Group analyst Phil Flynn said after the report. The longer the glut doesn’t hit, the more we will question whether it exists, he said.

The EIA data also showed strong implied oil demand, UBS analyst Giovanni Staunovo said. Combined with the decline in inventories, the EIA report was very positive for crude oil prices, he said.

Trump predicted a good outcome from his talks with Chinese President Xi Jinping, which are scheduled to take place on Thursday at a summit in South Korea.

Also at that summit, the U.S. and South Korea finalized details of a fraught trade deal.

The optimistic note about China-U.S. talks and the deal with South Korea could help alleviate some concerns of a slump in economic activity from Trump’s tariffs and trade wars, which have raised concerns around oil demand and weighed on commodity prices in recent months.