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Prices of oil rise on US-China trade talks

Oil prices rose on Thursday, after dropping more than $1 the previous session. This was due to hopes that a breakthrough would be made in upcoming trade talks between China and the U.S., two of the largest oil consumers in the world.

Brent crude futures rose 51 cents or 0.8% to $61.63 per barrel. U.S. West Texas intermediate crude rose 57 Cents or 1%, reaching $58.64 per barrel at 0420 GMT.

Tina Teng, an independent analyst, said that optimism around the U.S.-China trade talks at the weekend was a major factor in supporting the recovery of the oil market.

"Signs that a trade war was deescalating improved the market sentiment and triggered a recovery in oil prices on an oversold marketplace."

Scott Bessent, U.S. Treasury secretary, will meet China's top official in the economy on May 10, for talks about a trade conflict that is disrupting global economic growth. These are the two world's largest economies, and their trade war is likely to reduce crude consumption growth.

Donald Trump, the U.S. president, suggested on Wednesday that China initiated trade talks. He added that he would not be willing to lower U.S. tariffs against Chinese goods in order to convince Beijing to negotiate. Bessent stated that the talks will be a beginning, and not an 'advanced discussion'.

After the Federal Reserve kept interest rates at their current levels but warned of rising economic uncertainty, weak demand concerns have capped oil prices gains.

The Fed has indicated that it will probably hold rates until the tariff effects are clearer. The U.S. Dollar was boosted, adding to the headwinds on the broader commodities markets.

Dollar-denominated crude oil becomes more expensive and less desirable for holders of currencies other than the U.S. dollar.

Analysts are concerned that the U.S. is not preparing for the summer period of demand. This month, gasoline inventories in the U.S. rose, adding to concerns about a weakening demand.

OPEC+ (Organisation of the Petroleum Exporting Countries) and its allies will simultaneously increase their oil production, increasing pressure on the price.

(source: Reuters)