Investing.com-- Oil prices edged higher Tuesday, trading near a two-week high on optimism following news of U.S.-China tariff reductions, as investors await key U.S. inflation data due later in the day.
At 07:55 ET (11:55 GMT), Brent Oil Futures expiring in June edged 1.1% higher to $65.65 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.1% to $62.64 per barrel.
U.S.-China trade deal offers support
The crude market received a boost on Monday following the announcement that the U.S. will reduce its tariff on Beijing from 145% to 30%, while China will lower its retaliatory tariff from 125% to 10%, both for 90 days.
As the world’s two largest economies move toward a more stable trade relationship, expectations of stronger industrial activity and consumer demand, especially in China, lifted sentiment around the demand outlook.
“However, while a thawing in trade tensions between China and the US is helpful, there’s still plenty of uncertainty over what happens in 90 days. This uncertainty could continue to generate headwinds for oil demand,” ING analysts said in a note.
For the day, investors awaited the U.S. consumer price index inflation data for April, due on Tuesday, to assess the impact of President Donald Trump’s trade policies.
OPEC+ output hike looms
Despite easing trade tensions, investors remained worried about the demand outlook after plans from OPEC+ to increase oil output in May and June.
U.S. President Donald Trump is scheduled to visit Saudi Arabia, Qatar, and the UAE this week to address diplomatic concerns related to Gaza and Iran, while also seeking to advance business and trade agreements with the oil-rich nations.
“Though demand has been a key concern for the oil market, supply increases from OPEC+ mean that the oil market will be well supplied through the remainder of the year. How well supplied depends on whether OPEC+ sticks with the aggressive supply hikes we saw for May and June,” ING analysts said.
“Also, the forward curve suggests the market may become increasingly more comfortable with supply towards year-end,” they added.
Investors also closely monitored increased geopolitical tensions between India and Pakistan, after both sides agreed to a ceasefire over the weekend following the worst fighting in decades.
Ayushman Ojha contributed to this article.