Global oil benchmark Brent crude rose 1% to near $65 a barrel on Tuesday, snapping four straight days of declines on easing Mideast tensions as the United States and China, the world's top energy consumers, prepared to sign a preliminary trade deal.
Brent futures for March settlement fell 78 cents to $64.20 a barrel on the ICE Futures Europe Exchange after losing 5.3% last week.
Oil prices were supported ahead of the signing at the White House on Wednesday of a Phase 1 U.S.
However, gains were limited by easing concern over possible supply disruptions as a result of tensions in the Middle East.
Backwardation in Brent LCoC1-LCOc2, a market structure where prices for near-term contracts are higher than those for later contracts, is now at 72 cents per barrel, from 84 cent a week earlier, whereas the WTI backwardation CLc1-CLc2 is at 4 cents a barrel from 23 cents last week. "In case of a trade deal upward revisions can be anticipated", Varga said.
Saudi Arabia's energy minister Prince Abdulaziz bin Salman said his country will work for oil market stability at a time of heightened U.S.
"There is a continuing sense that the geopolitical risk from Iran has come down dramatically", said Phil Flynn, a senior market analyst at Price Futures Group Inc.
"Regardless whether the deal is signed, we might have a buy the rumours, sell the fact scenario unfolding", he added.
On Monday, the USA heating oil crack spread, a measure of the profit margin for refining crude into diesel or heating oil, fell to $21.56, the weakest in nearly five months.
Notwithstanding, Asia's largest economy, China, had a significant increase in its crude oil imports in 2019, a 9.5 percent higher from the previous year which made it the 17consecutive years of continuous growth in crude oil imports due to a number of refineries that were built last year in China.
With tensions between the United States and Iran cooling, investors have had time to focus on fundamental demand issues, said John Kilduff, partner at Again Capital LLC in NY.
Oil prices surged to their highest in nearly four months after a United States drone strike killed an Iranian commander and Iran retaliated with missiles launched against USA bases in Iraq. The threat of an outright war has receded since Tehran fired missiles at US-Iraqi bases last week in retaliation for Washington's assassination of its top general.