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Crude soars as Trump-Xi meeting, ECB stimulus diminishes demand-growth concerns

New York — Oil futures settled sharply higher Tuesday as the market eyed a possible thaw in Sino-US trade relations after US President Donald Trump announced he would meet with Chinese President Xi Jinping later this month.

NYMEX July WTI settled $1.97 higher at $53.90/b and ICE August Brent was up $1.20 at $62.14/b at market close.

Trump announced via Twitter Tuesday morning that he would meet with his Chinese counterpart at the G-20 summit next week in Osaka, Japan.

"Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting," Trump tweeted.

A tit-for-tat trade war between Washington and Beijing has weighed on economic outlooks and dampened demand for refined products in recent months.

"An announcement that a US-China resolution is in the works would really tamp down fears of slowing growth," Tradition Energy analyst Gene McGillian said.

Fading demand growth concerns sent WTI futures soaring. The prompt WTI contract was up 3.8% from Monday's close, marking the largest interday gain for the front-month contract since January 9. In contrast, front-month Brent was up around 2% from Monday.

The WTI forward structure also moved significantly more bullish as prompt-dated contracts saw outsized price increases. The backwardation in the one-year WTI contract spread opened to 72 cents/b, up from 13 cents/b in the previous session, and the front-month/sixth-month spread moved into a 3 cent/b backwardation, after settling in a 43 cent/b contango on Monday.

NYMEX refined product futures traced crude higher. July RBOB settled 3.06 cents higher at $1.7214/gal and July ULSD was up 2.83 cents at $1.8278/gal at market close.

Oil futures were already trending higher ahead of Trump's announcement on the back of comments from European Central Bank President Mario Draghi signaling the bank could undertake further monetary stimulus in response to economic malaise in Europe.

"In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required," Draghi said.

Increased certainty surrounding a meeting date for the an extension of a 1.2 million b/d production cut agreement between OPEC and its allies rounded out the bullish market picture Tuesday.

OPEC is considering a proposal to move the date of its next meeting in Vienna to July 11-12, two sources told S&P Global Platts on Tuesday.

Under the proposal, OPEC would meet on July 11, with Russia and nine other non-OPEC allies joining the talks on July 12.

The shift would accommodate Iran, which had said Monday it would not be able to make the July 3-4 date proposed by Russia. The meeting had originally been scheduled for June 25-26, but Russia had requested the change so that it would occur after the G-20 summit in Japan on June 28-29.

-- Chris van Moessner, christopher.vanmoessner@spglobal.com

-- Edited by Derek Sands, newsdesk@spglobal.com