The oil market appreciated by more than 1 per cent to settle at a two-week high on Monday, after the US and China agreed to temporarily slash tariffs, raising hopes of an end to the trade war between the world’s two biggest economies.
The price of Brent crude went up by $1.05 or 1.6 per cent to $64.96 per barrel and the US West Texas Intermediate (WTI) crude gained 93 cents or 1.5 per cent to settle at $61.95 per barrel.
The US and China, the world’s largest and second-largest economies, respectively, agreed to slash tariffs on each other as they seek to end their trade war.
Speaking after talks with Chinese officials in Geneva, US treasury secretary Scott Bessent told reporters the two sides had reached a deal for a 90-day pause on measures.
This meant the US is reducing its 145 per cent tariff to 30 per cent on Chinese goods while China agreed to reduce its 125 per cent retaliatory tariffs to 10 per cent on US goods.
In recent weeks, investors worried the US-China trade war could depress economic growth and oil demand. Also, the Organization of the Petroleum Exporting Countries (OPEC) decided to boost oil output by more than previously expected.
Crude prices went higher on hopes the world’s two biggest oil consumers can end a trade war that has stoked fears of recession.
In Saudi Arabia, the biggest producer in OPEC, oil giant Aramco said it expects oil demand to remain resilient this year and sees further upside if the US and China resolve their trade dispute.
In Iraq, OPEC’s second largest producer, crude exports were on track to decline to around 3.2 million barrels per day in May and June, which would be a significant reduction from previous months.
Halt in production as Norwegian energy firm Equinor said it temporarily halted output from the Johan Castberg oilfield in the Arctic Barents Sea to make repairs also offered support.
Ongoing talks between the US and Iran over the c0untry’s nuclear program could pressure crude prices, since Iran is OPEC’s third largest producer and any nuclear deal could reduce sanctions on Iran’s exports.
Russian crude supply could also increase on global markets if U.S.-brokered talks result in peace between Russia and Ukraine.
Ukrainian President Volodymyr Zelenskiy said he was ready to meet Russia’s Vladimir Putin in Turkey on Thursday after US President Donald Trump told him publicly to immediately accept proposal of direct talks.
In India, Prime Minister Narendra Modi warned Pakistan that it would target “terrorist hideouts” across the border again if there were new attacks on India. This could have effects as India is the world’s third biggest consumer of oil.