Oil prices rose on Tuesday as investors awaited the outcome of U.S.-China trade talks and as Saudi Arabia's crude supplies to China were set to drop slightly.

Brent crude futures rose 34 cents, or 0.5%, to $67.38 a barrel by 1045 GMT. U.S. West Texas Intermediate crude futures rose 33 cents, or 0.5%, to $65.62.

Brent had risen to $67.19 on Monday, its highest since April 28, supported by the prospect of a U.S.-China trade deal.

U.S.-China trade talks are set to continue for a second day in London as top officials aim to defuse tensions that have flared over tariffs and rare earth restrictions, which have disrupted global supply chains and slowed growth.

"There's a sense of optimism around these trade talks, the market is waiting to see what's going to come out of it and that's supporting prices," said Harry Tchilinguirian, head of research at Onyx Capital Group.

Prices have recovered as demand concerns have eased with trade talks between Washington and Beijing and a favorable U.S. jobs report, while there are risks to North American supply from wildfires in Canada, Goldman Sachs analysts said.

U.S. President Donald Trump said on Monday that talks with China were going well and he had "nothing but good reports" from his team in London.

A trade deal between the U.S. and China could support the global economic outlook and boost demand for commodities including oil.

Saudi Arabia's state oil company Saudi Aramco will ship about 47 million barrels to China in July, a tally of allocations to Chinese refiners showed, 1 million barrels less than the volume allocated in June, Reuters reported.

"The Saudi allocation could be an early sign that the OPEC+ easing may not actually mean that much additional supply," Tchilinguirian said. "After all this easing, one would think we would get more from countries that can produce more."

OPEC+, which pumps about half the world's oil and includes OPEC members and allies such as Russia, presented plans for a 411,000 barrel per day increase for July as it seeks to regain market share and punish overproducing producers. The country is set to end production cuts for a fourth straight month. A Reuters survey found that OPEC oil output rose in May, although the increase was limited as Iraq pumped below target to offset previous overproduction and Saudi Arabia and the United Arab Emirates made smaller increases than allowed.

"The prospect of further increases in OPEC supply continues to haunt the market," Daniel Hynes, senior commodity strategist at ANZ, said in a note. Elsewhere, Iran said it would soon present a counter-proposal to the nuclear deal to the US in response to a US offer that Tehran deemed "unacceptable," while Trump reiterated that the two sides were still at odds over whether the country should be allowed to continue enriching uranium on Iranian soil.

Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries and the easing of US sanctions on Iran would allow it to export more oil, which would weigh on global crude prices. (alg)

Source: Reuters