Oil Heads for Best Month Since January Before Trade, OPEC Talks

(Bloomberg) -- Oil is headed for its biggest monthly gain since January as traders await gatherings that could be decisive for U.S.-China trade and OPEC-led supply curbs.

Futures in New York have gained 11% so far in June after escalating tensions between the U.S. and Iran triggered fears of disruptions in the Straight of Hormuz, a vital waterway for crude shipments from the Middle East. On Thursday, prices were little changed as the outcome of a meeting between U.S. President Donald Trump and Chinese leader Xi Jinping this weekend is still uncertain. OPEC and its allies gather in Vienna next week.

“The uncertainty ahead of this weekend’s G-20 and next week’s OPEC meetings are likely to keep the upside capped for now,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “Failure at the weekend would see the market focus return to global growth and demand worries.”

For the second quarter, prices are surprisingly close to where they started in April, after three months in which Trump stiffened sanctions against Iran and Venezuela, while explosions struck Persian Gulf tankers. That’s largely because the collapse of trade talks between the world’s two largest economies has dimmed the outlook for global growth and oil demand.

West Texas Intermediate for August delivery rose 5 cents to $59.43 a barrel on the New York Mercantile Exchange, its highest closing price since May 22. Brent for August settlement was 6 cents higher at $66.55 on London’s ICE Futures Europe Exchange.

Gasoline futures fell 1.2% as it became clear suppliers from the U.S. Gulf Coast and Europe would be able to fill the gap for the closure of the biggest refinery on the U.S. East Coast.

Trump will meet with Xi on Saturday in Osaka, according to the White House. “My Plan B with China is to take in billions and billions of dollars a month and we’ll do less and less business with them,” Trump said Wednesday in an interview with Fox Business Network. The American president has previously said he may raise tariffs on the remaining $300 billion of Chinese imports.

A trade deal would boost the demand outlook and take oil prices higher, said Frances Hudson, a global strategist at Aberdeen Standard Investments in Edinburgh. But the move could be temporary, given other signs of a slowing economy and the overhang of increasing U.S. production, she said.

“There’s plenty of volatility in this market,” Hudson said. “I don’t think anybody could have any confidence that trade is suddenly going to resume, be smooth and feed into higher growth going forward.”

--With assistance from Sharon Cho.

To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net;Rakteem Katakey in London at rkatakey@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Joe Carroll

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