Oil jumped to a four-month high after U.S. President Donald Trump indicated that he doesn’t want to add more sanctions against Chinese officials for now in a move to diffuse tensions with Beijing. Crude futures in New York rose 2.3% Wednesday. The decision to refrain from further restrictions added positive momentum to a market already supported by a U.S. government report showing that crude stockpiles contracted by the most this year. Earlier, Saudi Arabia and Russia said OPEC+ will taper its output curbs in August, but the supply increase will be offset as demand recovers and laggard members compensate for overshooting quotas by making extra reductions.
“Oil has been tracking equities short-term, and equities went up on the news,” said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures. “No conflict with China is good for oil.”
The large draw from American stockpiles in the Energy Information Administration report was largely due to declining imports, signaling the end of excess shipments from Saudi Arabia. At the same time, U.S. gasoline demand increased for the 11th consecutive week to the highest since late March.