Oil extended gains on Tuesday, lifted by hopes of improved economic activity after the U.S.-EU trade deal, a potential U.S.-China tariff truce and President Donald Trump's shorter deadline for Russia to end the Ukraine war.

Brent crude futures were up 24 cents, or 0.34 percent, to US$70.28 (HK$548.18) a barrel by 0000 GMT, while U.S. West Texas Intermediate crude was at US$66.93 a barrel, up 22 cents, or 0.33 percent.

Both contracts settled more than 2 percent higher in the previous session, and Brent touched its highest level since July 18 on Monday.

The trade agreement between the United States and the European Union, while imposing a 15 percent import tariff on most EU goods, sidestepped a full-blown trade war between the two major allies that would have rippled across nearly a third of global trade and dimmed the outlook for fuel demand.

Oil prices were also supported by news of a possible extension of the trade truce between the U.S. and China, with top economic officials from both countries having met in Stockholm on Monday for more than five hours of talks. The discussions are expected to resume on Tuesday.

Meanwhile, Trump set a new deadline on Monday of "10 or 12 days" for Russia to make progress toward ending the war in Ukraine or face sanctions. Trump has threatened sanctions on both Russia and buyers of its exports unless progress is made.

"Trump's comments reignited fears that Russia's oil flows would be impacted," ANZ senior commodity strategist Daniel Hynes wrote in a note.

"This also comes on the back of the latest sanctions package by the EU against Russia, including a lower price cap on the country's crude and the import of refined products made from Moscow's oil in other countries," Hynes added.

REUTERS

Oil climbs on EU trade deal, potential US-China tariff truce extension