Crude oil jumped the most since early January as the trade deadlock between the world’s biggest economies showed signs of easing, calming fears that global economic growth would be endangered.

Futures surged as much as 5% in London on Tuesday, topping $61/bbl for the first time in more than a week. Optimism swept across financial markets after the U.S. postponed tariffs on some Chinese goods and the Asian powerhouse said the two sides will hold new talks in two weeks. New York-traded crude climbed 4.6%.

“Some of the pessimism about oil demand and the trade war is being washed out of the market by these announcements,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Global benchmark oil rises by most since early January

While Brent has gained the last three days, it’s still down about 6% this month. Saudi Arabia’s pledge to curb exports in a matter of weeks hasn’t been sufficient to offset booming production from American shale fields and lingering fears about demand growth.

“We still have an undecided oil market,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “That may be surprising, given the renewed verbal intervention from oil producers increasingly frustrated to see that their medicine — production cuts — isn’t having the desired effect.”

In the U.S., West Texas Intermediate crude for September delivery rose $2.05 to $56.98/bbl at 1:45 p.m. on the New York Mercantile Exchange.

Brent for October settlement rose $2.58 to $61.15 on the ICE Futures Europe Exchange, after earlier rising the most since Jan. 9. The global benchmark crude traded Tuesday at a $4.30 premium to WTI for the same month, a rebound after it had shrunk to the narrowest since March 2018.

The U.S. will postpone until mid-December a 10% tariff on Chinese products on many holiday-shopping lists, including mobile phones and toys, President Donald Trump said. China said top officials from the countries spoke by telephone on Tuesday and will resume discussions in two weeks.

Expectations of declining U.S. crude supplies are also driving bullish sentiment. Inventories probably dropped by about 2.5 MMbbl last week, according to the median estimate in a Bloomberg survey before Energy Information Administration data due Wednesday.

Source: www.worldoil.com