Oil prices stabilized as a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping began, amid the Iran war which shows no signs of a near-term resolution.
Brent crude traded around $106 a barrel after falling 2% in the previous session, while West Texas Intermediate crude settled near $101.
In his opening remarks in Beijing following the welcoming ceremony, Trump said that the relationship between China and the United States would be better than ever.
Meanwhile, the war has caused global oil inventories to plummet at a record pace, and the market will remain severely undersupplied until October, even if the conflict ends next month, according to the International Energy Agency. Prior to the Trump-Xi summit, the United States threatened banks and imposed sanctions on additional entities for selling Iranian oil to China, its largest crude buyer.
Hormuz remains the epicenter of supply disruptions.
Crude oil and fuel flows through the vital Strait of Hormuz fell by about 6 million barrels per day in the first quarter, after hostilities began in late February, according to the Energy Information Administration. Only a small number of tankers were able to leave the waters of the Arabian Gulf during the conflict.
Rebecca Babin, senior energy trader at CIBC Private Wealth Group, said: “As long as the path still appears to be leaning towards diplomacy rather than outright escalation, the market remains focused on the end result – when flows will eventually resume – even as that timeline continues to be delayed.”
The ceasefire has held since early April, despite a series of escalations, but the United States and Iran appear to be making little progress toward resolving their differences and agreeing on a peace proposal. This has effectively kept the Strait of Hormuz closed, choking off vital energy supplies to global customers.
The end of sanctions relief is putting pressure on India.
Iranian crude shipments have also been restricted by a US naval blockade of the country's ports. The oil berths at the main export terminal on Kharg Island were empty again on Tuesday, according to satellite images compiled by Bloomberg News. For the fourth consecutive time that satellites have detected activity at the facility, no tankers were seen.
A US sanctions waiver that allowed the purchase of Russian oil aboard tankers at sea is set to expire this week, leaving refineries in India, one of the largest buyers, particularly vulnerable. The South Asian nation has imported substantial volumes so far this month.
In the latest trading, Brent crude futures for July settlement rose 0.3% to $105.98 a barrel by 10:50 a.m. Singapore time. West Texas Intermediate crude for June delivery climbed 0.4% to $101.45 a barrel.
