Oil prices climb to 2-month high on US-China trade deal, worries about Iran supply

Brent crude futures rose $1.32, or 1.97%, to $68.19 a barrel at 11:35 a.m. EDT (1535 GMT). U.S. West Texas Intermediate crude was up $1.51, or 2.32%, to $66.49. Both Brent and WTI reached their highest in more than two months.

The trade-related downside risk in oil has been temporarily removed, although the market reaction has been tepid as it is not clear how economic growth and global oil demand will be affected, PVM analyst Tamas Varga said.

Trump said he was less confident that Iran would agree to stop uranium enrichment in a nuclear deal with Washington, according to an interview released on Wednesday.

Ongoing tension with Iran means its oil supplies are likely to remain curtailed by sanctions.

Supplies will still increase, as OPEC+ plans to boost oil production by 411,000 barrels per day in July as it looks to unwind production cuts for a fourth straight month.

“Greater oil demand within OPEC+ economies – most notably Saudi Arabia – could offset additional supply from the group over the coming months and support oil prices,” said Capital Economics’ analyst Hamad Hussain in a note.

In the U.S., crude inventories fell by 3.6 million barrels to 432.4 million barrels last week, the Energy Information Administration said on Wednesday. Analysts polled by Reuters had expected a draw of 2 million barrels.

“It’s a bullish report,” said Bob Yawger, director of energy futures at Mizuho, adding that the demand for motor gasoline began to strengthen.

Product supplied for motor gasoline, a proxy for demand, rose by about 907,000 barrels per day last week, to 9.17 million bpd.

U.S. consumer prices increased less than expected in May, deepening the conviction in financial markets that the Federal Reserve will start cutting interest rates by September. Lower interest rates can spur economic growth and demand for oil.