Dispute between top two oil consumers has rattled markets; China promises to open economy further, cut import tariffs.
Oil broke above $70 a barrel on Tuesday, extending strong gains from the previous day, as investors grew more optimistic that a trade dispute between the United States and China may be resolved without greater damage to the global economy.
Brent crude futures were up $1.39 at $70.04 a barrel by 1131 GMT, while West Texas Intermediate crude futures rose $1.23 to $64.65 a barrel.
The oil price has risen by nearly 4.5 percent in the last two trading days.
President Xi Jinping on Tuesday promised to open China's economy further and lower import tariffs, in a speech that struck a conciliatory tone on the trade tensions between China and the United States.
Equities and industrial commodities rose, while perceived safe-havens such as gold and U.S. Treasuries came under pressure, reflecting confidence among traders and investors that a trade war is increasingly unlikely.
"It's not so much 'risk on/risk off', as it is 'trade war on/trade war off' and, at the moment, we're 'trade-war off'," London Capital Group's Jasper Lawler said.
"There's a lot of political motivation in the tariffs in the United States, but ultimately, they won't want a trade war, there is a general desire to boost the U.S. economy."
Concerns of a prolonged trade dispute between the world's two biggest economies and uncertainty over the supply and demand balance of global oil markets have made for volatile trading in the last few weeks.
Oil briefly rose above $70 two weeks ago, after Saudi Arabia vowed it would keep an agreement in place to limit supply into next year. But the U.S. decision to impose tariffs on $50 billion of Chinese goods a week later sent the price to a two-week low.
Oil markets have been supported by healthy demand and supply cuts led by the Organization of the Petroleum Exporting Countries.
However, soaring U.S. crude production <C-OUT-T-EIA>, which has jumped by a quarter since mid-2016, threatens to undermine OPEC's efforts.
The American Petroleum Institute will
publish storage data later on Tuesday while the U.S. Energy Information Administration releases its monthly report on U.S. production.
"Today’s monthly report from the EIA is likely to confirm that the supply situation is set to ease, primarily on the back of growing non-OPEC production," Commerzbank said
in a note.
"It is doubtful whether this will pressure the price, however, as the most recent price drivers were for the most part not fundamental in nature."
By Amanda Cooper