Oil prices rose on Monday as the prospect of an expected interest rate cut by the U.S. Federal Reserve overshadowed pessimism over U.S.-China trade talks and oil demand fears stoked by forecasts for slower global economic growth.
Brent crude futures were up 21 cents at $63.67 a barrel by 1330 GMT after hitting a session low of $62.92.
U.S. West Texas Intermediate crude was up 58 cents at $56.78 a barrel after touching a low of $55.91.
Traders and investors are keeping a close eye on the Fed this week, with U.S. central bankers expected to lower borrowing costs this week for the first time since the depths of the financial crisis more than a decade ago.
U.S. President Donald Trump said on Twitter that a small Fed rate cut “is not enough”.
Economic growth in the United States slowed less than expected in the second quarter, with a boom in consumer spending, strengthening the outlook for oil consumption.
But non-U.S. growth is slowing faster, partly because of the trade war with China over the past year.
“Even though the crude oil supply picture is fundamentally tight … and geopolitical risks front and centre, the market remains extremely bearish around demand risks due to the escalation in protectionist trade policies and the risk of additional punitive tariffs,” said Emily Ashford, director of energy research at Standard Chartered.
U.S. and Chinese negotiators meet this week for the first time since trade talks broke down in May, but expectations are low after President Trump said that China might not want to sign a trade deal until after the 2020 U.S. election.
“On the trade front, expectations may be low ahead of renewed Sino-U.S. talks, but any positive echoes this week will lift market sentiment,” said BNP Paribas global oil strategist Harry Tchilinguirian.
Crude prices were also supported by supply risk as tensions remain high around the Strait of Hormuz, through which about a fifth of the world’s oil passes.
Tensions have spiked between Iran and the West after Iranian commandos seized a British-flagged oil tanker in the Gulf this month in apparent retaliation for the seizure of an Iranian tanker by British forces near Gibraltar.
Britain on Monday rejected the idea that it could release the Iranian tanker in exchange for the British-flagged vessel.
U.S. energy companies last week reduced the number of oil rigs operating for a fourth week in a row, leaving the rig count down for an eighth consecutive month.