Oil up as investors pin hopes on Trump-Xi meeting

Oil prices edged higher on Thursday, May 14, as markets focused on a high-stakes meeting between US President Donald Trump and Chinese President Xi Jinping, looking for any signs of progress toward resolving the Iran war.

Trump is expected to urge China to persuade Tehran to reach an agreement with Washington to end the conflict. However, analysts, cited by Reuters, doubt that Xi will be willing to apply significant pressure on Iran, which remains a long-time strategic partner of China.

By 0714 GMT, Brent crude futures had risen by 45 cents, or 0.43%, to $106.08 per barrel, while US West Texas Intermediate futures gained 41 cents, or 0.41%, to $101.43 per barrel.

Both benchmark contracts had declined on Wednesday, May 13, as investors grew concerned about potential US interest rate hikes, with higher fuel prices adding to inflationary pressures. Brent crude fell by more than $2 per barrel, while WTI dropped by more than $1.

At the start of the two-day summit on Thursday, Xi told Trump that trade negotiations were making progress, but warned that disagreements over Taiwan could push relations in a dangerous direction. His remarks, reported by the Xinhua news agency, set the tone for the talks, which Trump described as potentially the "biggest summit ever" following a ceremonial reception at Beijing’s Great Hall of the People.

"Oil prices are in a wait-and-see mode," ING analysts said in a note on Thursday, adding that the market may be placing excessive hope on the US-China talks delivering positive outcomes regarding the Iran war.

The Strait of Hormuz, a critical global energy corridor, has been largely shut since the conflict began at the end of February.

"Failure to make meaningful progress on reopening the strait could leave the US with few options other than renewed military action," IG analyst Tony Sycamore said in a note.

Iran appears to have tightened its control over the strait, securing arrangements with Iraq and Pakistan to facilitate shipments of oil and liquefied natural gas from the region.

On Wednesday, a Chinese supertanker carrying 2 million barrels of Iraqi crude successfully passed through the strait after being stranded in the Gulf for more than two months. It was only the third oil tanker to exit the strait since the war began.

Meanwhile, the International Energy Agency said on Wednesday that global oil supply is expected to fall short of total demand this year, as the war disrupts Middle East production and rapidly depletes inventories. This marks a reversal from its earlier forecast, which had projected a surplus.

By Tamilla Hasanova