- Trump says in social media post U.S. and Chinese teams to meet shortly
- Xinhua reports US, China leaders spoke by phone
- US gasoline, distillate stocks post big weekly builds
- Saudi Arabia cuts prices for Asian crude buyers to 2-month low
- Bearish economic outlook weighs on oil prices, analysts say
HOUSTON, June 5 (Reuters) - Oil prices rose 1% on Thursday, rebounding from the previous day's drop as traders responded to news that U.S. and Chinese teams will meet shortly, following a phone call on trade held between U.S. President Donald Trump and Chinese leader Xi Jinping.
Brent crude futures were up 65 cents, or 1%, at $65.51 a barrel by 11:36 a.m. EDT (15:36 GMT). U.S. West Texas Intermediate crude rose 66 cents, or 1.05%, to $63.51 a barrel.
"If we step back from the brink of a major trade war, it will increase demand expectations for oil both in the U.S. and in China," said Phil Flynn, senior analyst with Price Futures Group.
Earlier, the official Xinhua news agency reported that the talks were held at Trump's request.
The news encouraged investors a day after oil fell 1% as data showed U.S. gasoline and distillate stockpiles grew more than expected, reflecting weaker demand in the world's largest economy.
Geopolitical events and wildfires in Canada that threaten to reduce oil production are providing further price support, despite a potentially over-supplied market in the second half of the year with expected OPEC+ production hikes, PVM analyst Tamas Varga said.
Curbing gains on Thursday, Saudi Arabia, the world's biggest oil exporter, cut its July prices for Asian crude buyers to nearly the lowest level in two months.
The Saudi price cut followed a move by OPEC+ last weekend to increase output by 411,000 barrels per day (bpd) for July.
The strategy of Saudi Arabia, OPEC's de facto leader, is partly to punish over-producers by potentially unwinding 2.2 million bpd between June and the end of October, in a bid to wrestle back market share, Reuters previously reported.
Data on Wednesday showed that the U.S. services sector contracted in May for the first time in nearly a year.
Additionally, the number of Americans filing new applications for unemployment benefits increased for the week ending May 31, marking the second straight weekly jump, the Labor Department said on Thursday, pointing to softening labour market conditions amid mounting economic headwinds from Trump's tariffs.
The release on Friday of the U.S. nonfarm payrolls report for May could influence the U.S. Federal Reserve's interest rate policy, while the market's focus will be also on geopolitical tensions in the Middle East, UBS analyst Giovanni Staunovo said.
Reporting by Georgina McCartney in Houston, Enes Tunagur in London, Katya Golubkova in Tokyo and Emily Chow in Singapore; Editing by Tom Hogue, Emelia Sithole-Matarise, Ed Osmond, Paul Simao and David Gregorio
Source: Reuters