Oil prices rise more than 1% after China-US leaders’ phone call

Oil prices rose more than 1% on Thursday, recovering from a drop the previous day.

Brent crude futures increased 85 cents, or 1.3%, to $65.71 a barrel by 1351 GMT. U.S. West Texas Intermediate crude climbed 97 cents, or about 1.5%, to $63.82 a barrel.

The gains followed reports of a phone call between U.S. and Chinese leaders to discuss tariff issues.

The previous day's drop came after data showed U.S. gasoline and distillate stockpiles grew more than expected, signalling weaker demand. Geopolitical events and wildfires in Canada threaten to reduce oil production, supporting prices despite an expected increase in OPEC+ output in the second half of the year.

Saudi Arabia cut July prices for Asian crude buyers to near the lowest level in two months after OPEC+ decided to raise output by 411,000 barrels per day for July. The price cut is part of a strategy to manage market share by addressing over-production.

Data also showed the U.S. services sector contracted in May for the first time in nearly a year, while weekly jobless claims rose for the second straight week, suggesting a softening labour market amid economic pressures from tariffs. The upcoming U.S. nonfarm payroll report could influence Federal Reserve interest rate decisions.

Market attention is also focused on tensions in the Middle East.