Oil recoups some losses as investors focus on US-China trade talks

By Florence Tan

SINGAPORE, Oct 13 (Reuters) - Oil prices rose on Monday after hitting five-month lows in the previous session, as investors hoped potential talks between the presidents of the U.S. and China could ease trade tensions between the world's two largest economies and oil consumers.

Brent crude futures LCOc1 climbed 92 cents, or 1.47%, to $63.65 a barrel by 0622 GMT after settling down 3.82% on Friday at the lowest since May 7.

U.S. West Texas Intermediate crude CLc1 was at $59.79 a barrel, up 89 cents, or 1.51%, following a 4.24% loss on Friday to its lowest since May 7. WTI prices will settle on Tuesday as Monday is a public holiday in parts of the U.S.

"Last week's price meltdown was largely on the back of ceasefire in Gaza and return of U.S.-China trade volatility ahead of the 10-Nov trade truce deadline," DBS energy analyst Suvro Sarkar said.

The selloff in markets now looks to be capped by both parties' willingness to negotiate, he said, adding the near-term outlook hinged on the eventual outcome of the trade talks.

U.S.-China trade tensions flared up last week after China expanded its rare earth export controls. In response, U.S. President Donald Trump on Friday said he would impose 100% tariffs on China's U.S.-bound exports, along with new export controls on "any and all critical software" by November 1.

But on Sunday he said on Truth Social: "Don’t worry about China, it will all be fine!"

The moves come ahead of a potential meeting between Trump and his Chinese counterpart Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation forum in South Korea, which U.S. Trade Representative Jamison Greer said could still happen later this month.

"The most likely scenario seems to be that both sides pull back on the most aggressive policies and that talks lead to a further - and possibly indefinite - extension of the tariff escalation pause reached in May," Goldman Sachs analysts said in a note.

However, there is still the risk of trade tensions escalating that may lead to higher tariffs or more serious export restrictions, at least temporarily, they added.

Oil prices tumbled in March and April during the height of trade tensions between the two countries.

China's crude imports in September rose 3.9% from a year earlier to 11.5 million barrels per day, customs data showed, as refineries operated at their highest utilisation rates so far this year and as stockpiling efforts continued.

In the Middle East, Palestinian militant group Hamas released the first seven surviving Israeli hostages on Monday, an official involved in the operation said, the initial phase of a ceasefire agreement that Trump helped to broker aimed at ending the conflict in Gaza.