Oil prices have risen by 2%, reaching a two-week high, following the announcement of tariff reductions between the US and China. Oil prices experienced an increase of around 2% after the U.S. and China reached an agreement to reduce tariffs, which has sparked optimism regarding a potential resolution to their ongoing trade conflict. Brent crude reached $65.26 a barrel, while WTI crude hit $62.42. Saudi Aramco expects robust oil demand, which could rise further should the U.S. and China reconcile their disputes. However, the potential Iranian nuclear deal and U.S.
Oil prices surged approximately 2% to reach a two-week peak on Monday, following an agreement between the U.S. and China to temporarily reduce tariffs. This development has sparked optimism regarding a potential resolution to the trade conflict between the two largest economies globally. Brent crude futures increased by $1.35, representing a 2.1% rise, reaching $65.26 a barrel by 11:40 EDT. Meanwhile, U.S. West Texas Intermediate (WTI) crude saw an uptick of $1.40, or 2.3%, bringing it to $62.42.
The U.S. and China have come to a deal that exceeds expectations, resulting in a temporary reduction of tariffs. This development has led to significant increases in Wall Street stocks, the U.S. dollar, and crude prices, as the two largest oil consumers aim to resolve a trade war that has raised concerns about a potential recession. “This was a larger-than-expected de-escalation and represents an upgrade to the outlook, though the negotiation process will likely remain challenging,” analysts at bank ING stated in a note.
In April, oil prices experienced a decline to a four-year low, largely driven by concerns regarding the potential impact of the U.S.-China trade war on global economic growth and oil demand. Concurrently, the Organization of the Petroleum Exporting Countries (OPEC) opted to increase oil output beyond earlier projections.
In Saudi Arabia, the largest producer within OPEC, oil behemoth Aramco has indicated that it anticipates oil demand to stay robust this year and perceives additional potential for growth should the U.S. and China effectively settle their trade conflict. In Iraq, the second largest producer in OPEC, oil exports were projected to decrease to approximately 3.2 million barrels per day (bpd) of crude in May and June, representing a notable decline from earlier months.
In the U.S., a House committee in Congress has unveiled a budget proposal that allocates over $1.5 billion for the replenishment and maintenance of the Strategic Petroleum Reserve, while also proposing the cancellation of a congressionally mandated sale after significant sales from the facility in 2022. Oil prices received a boost following the announcement from Norwegian energy firm Equinor regarding the temporary suspension of output from the Johan Castberg oilfield in the Arctic Barents Sea for necessary repairs. In the Black Sea, exports of Black Sea CPC Blend through the Caspian Pipeline Consortium system are projected to decrease to 1.5 million bpd in May, a reduction from approximately 1.6 million bpd in April.
One factor that could potentially reduce oil prices is the ongoing negotiations between the U.S. and Iran regarding Tehran’s nuclear program. Iran stands as the third largest producer within OPEC, and any nuclear agreement has the potential to alleviate sanctions, thereby enhancing the volume of oil that Iran could export.
Another factor that could potentially reduce oil prices is the possibility of U.S.-facilitated discussions between Russia and Ukraine. Ukrainian President Volodymyr Zelenskiy expressed his willingness to engage in discussions with Russia’s Vladimir Putin in Turkey on Thursday, following U.S. President Donald Trump’s public urging for him to promptly agree to the Kremlin leader’s suggestion of direct negotiations. Trump has brought forth the possibility of participating in discussions between Russia and Ukraine in Turkey. In 2024, Russia held the position of the world’s second largest oil producer, as reported by the U.S. Energy Information Administration. A potential agreement between Moscow and Ukraine may lead to a reduction in sanctions imposed on Moscow, consequently increasing the volume of oil that Russia is able to export.