Oil prices rose on Monday as the U.S.-China trade talks over the weekend signaled positive progress, which raised market sentiment that the world’s two largest oil users may be moving toward easing trade tensions.
As of 4:30 GMT, Brent crude futures gained 0.47 percent to $64.21, while U.S. West Texas Intermediate crude futures rose 0.54 percent to $61.35.
Both benchmarks increased more than $1 on Friday and gained over 4 percent last week, marking their first weekly gains since mid-April. This rise was supported by a U.S. trade deal with the United Kingdom, which made investors optimistic that economic repercussions from U.S. tariffs on its trading partners may be avoided.
Oil gains on positive U.S.-China talks
Oil prices continued their climb as the U.S. and China ended their trade talks on a positive note on Sunday, with U.S. officials signaling a “deal” to reduce the U.S. trade deficit, while Chinese officials said they had reached “important consensus”. Chinese Vice Premier He Lifeng said a joint statement would be released in Geneva on Monday.
The U.S. and China had imposed tit-for-tat tariffs on each other last month, triggering a trade war that raised fears of a global recession and propelled gold prices to several record highs. Ahead of the talks, U.S. President Donald Trump said on Friday that an 80 percent tariff on China “seems right.”
Since taking office in January, Trump has raised tariffs on imports from China to 145 percent, in addition to those he imposed on many Chinese goods during his first term and the duties imposed on Beijing by the Biden administration. China responded by imposing export curbs on some rare earth elements and raising tariffs on U.S. goods to 125 percent, in addition to charges on several products, including soybeans and liquefied natural gas.
Positive talks between the world’s two largest economies could help boost crude oil demand as trade is restored between them.
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Oversupply fears persist
Optimism over constructive U.S.-China talks supported market sentiment and pushed oil prices up; however, limited details and OPEC’s plan to raise output put a lid on gains. The Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, plans to accelerate output hikes in May and June, which will add more crude to the market, raising oversupply fears.
The trade optimism helped ease market concerns about a recession in the U.S. This, along with the Federal Reserve’s hawkish pause earlier this month, assisted the U.S. dollar (USD) to stand firm near a multi-week high touched on Friday.
Additionally, talks between Iran and the U.S. to resolve disputes over Tehran’s nuclear program ended in Oman on Sunday with further negotiations planned, officials said. A U.S.-Iran nuclear deal could ease concerns about a lower global oil supply, which could also impact oil prices. However, expectations for tighter U.S. supplies, along with persistent geopolitical risks, may support oil prices in the short term.
