The United States said it would extend a reprieve that permits China’s Huawei Technologies to buy components from US companies, in a sign of a slight softening of the trade war between both countries.
Brent crude had slipped 3 cents, or 0.05 per cent, to $59.71 a barrel, after rising 1.88% on Monday.
The US crude was down 15 cents, or 0.3 per cent at $56.06 a barrel, after gaining 2.44 per cent in the previous session.
The extension sets a very “comforting tone” ahead of next month’s US -China trade talks, Stephen Innes, managing partner, VM Markets, said in a note.
“The US -China trade spat has been at the centre of the oil market demise, which has sent the global economy to the brink of recession and negatively impacted oil demand forecasts,” he said.
A rally in equity markets around the world from growing expectations that global economies would take action to counteract slowing growth also supported oil prices, which often follow stocks.
China’s central bank unveiled interest rate reforms which are expected to lower corporate borrowing costs, while Germany’s right-left coalition government said it would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession.
Meanwhile, a Reuters poll of seven analysts showed that crude oil inventories in the United States fell by 1.9 million barrels in the week to August 16.
The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the energy Information Administration, (EIA), an agency of the US Department of Energy.
Still, prices were weighed down by a report from the Organization of the Petroleum Exporting Countries, OPEC, that stoked concerns about growth in oil demand.
OPEC cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market would be in slight surplus in 2020.
Traders were also watching for signs of tension in the Middle East after the US called the release of an Iranian tanker at the centre of an angry confrontation between Iran and Washington unfortunate and warned Greece and Mediterranean ports against helping the vessel.