BEIJING/SINGAPORE: Oil prices edged up on Thursday, with markets focusing on the high-stakes meeting between U.S. President Donald Trump and Chinese President Xi Jinping to see if it will yield any positive results towards a resolution for the Iran war.
Trump is expected to encourage China to convince Tehran to make a deal with Washington to end the conflict, but analysts doubt that Xi will be willing to push China's long-time strategic partner too hard.
Brent crude futures were up 45 cents, or 0.43%, to $106.08 a barrel by 0714 GMT, while U.S. West Texas Intermediate futures added 41 cents, or 0.41%, to $101.43.
Both benchmark oil futures contracts fell on Wednesday as investors worried about possible U.S. interest rate hikes as higher fuel prices spur inflationary pressures. Brent crude futures lost more than $2 a barrel, while WTI futures dropped more than $1.
Xi told Trump that trade talks were making progress at the start of the two-day summit on Thursday, but warned that disagreement over Taiwan could send relations down a dangerous path.
The Chinese leader's remarks, reported by Xinhua news agency, set the stage for what Trump has described as possibly the "biggest summit ever" following a pomp-filled reception at Beijing's Great Hall of the People.
"Oil prices are in a wait-and-see mode," ING analysts said in a note on Thursday, adding that the market could be pinning too much hope on the U.S.-China talks yielding some positive results on the Iran war.
The Strait of Hormuz, a key energy gateway, has been largely shut since the war broke out at the end of February.
"Failure to make meaningful progress on reopening the strait could leave the US with few options other than renewed military action," IG analyst Tony Sycamore said in a note.
Iran, meanwhile, appears to have tightened its control over the strait, cutting deals with Iraq and Pakistan to ship oil and liquefied natural gas from the region.
A Chinese supertanker carrying two million barrels of Iraqi crude sailed through the strait on Wednesday after being stranded in the Gulf for more than two months. It was only the third oil tanker to exit the strait since the war began.
Global oil supply will fall short of total demand this year as the war wreaks havoc on Middle East oil production and drains inventories at an unprecedented pace, the International Energy Agency said on Wednesday. Its earlier outlook had called for a surplus. - Reuters
