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Oil prices rise as the market looks at US-China trade negotiations and lower US output

Investors focused on U.S. China trade talks and signs that U.S. oil production is declining.

Brent crude futures rose 44 cents a bar, or 0.7% to $62,59 a bar by 0400 GMT. U.S. West Texas Intermediate crude gained 50 cents or 0.9% at $59.59 a gallon.

The benchmarks fell to a 4-year low after OPEC+ decided to increase output. This fueled fears of an oversupply, at a time that U.S. Tariffs are increasing concerns about demand.

Brent crude is trading higher on news that the U.S. will begin trade talks with China this weekend, extending a rally in oil, said commodities strategists from ING.

"While negotiations could help improve sentiment on the oil market we will need to see substantial progress in lowering tariffs to increase the outlook for demand," ING said.

In recent weeks, the lower oil price has prompted several U.S. companies to reduce their rigs. Analysts believe this will support prices by reducing production over time.

Daniel Hynes, senior commodity strategist at ANZ Bank, believes that the latest announcements suggest a decline in output over the next few months. Last month, we warned that the falling oil prices and decreasing drilling activity would increase the risk of U.S. output dropping.

Market sources cited American Petroleum Institute data on Tuesday to report that crude stocks dropped by 4.5 millions barrels during the week ending May 2.

The U.S. Government will release data about stockpiles at 10:30 am ET. ET (1430 GMT). The average expectation of the analysts polled is that U.S. crude stock will decline by 800,000 barrels for last week.

The signs that demand was improving also helped to support prices. China's consumers increased their spending on May Day and when the market returned from the holiday.

Analysts expect companies in Europe to report a 0.4% increase in their first-quarter earnings. This is an improvement from the 1.7% decline analysts expected just a week earlier.

It is expected that the Federal Reserve will leave interest rates in the United States unchanged on Wednesday, as tariffs continue to roil economic prospects. Reporting by Nicole Jao from New York, and Jeslyn Lerh from Singapore; Editing and rewriting by Stephen Coates and Kate Mayberry

(source: Reuters)