Oil Surges Over 3% Amid Easing of US-China Tariffs

TOKYO: Oil prices increased by over $2 during Asian trading on Monday, following announcements from the U.S. and China regarding the easing of certain tariff measures, which improved market sentiment that the two largest crude consumers might be approaching a resolution of their trade conflict. Brent crude futures rose by $2.11, or 3.3 per cent, reaching $64.14 a barrel by 0714 GMT. U.S. West Texas Intermediate (WTI) crude futures were priced at $63.14 per barrel, rising by $2.12, or 3.47 per cent, compared to Friday's closing value. On Monday, both parties announced they would pause 24 per cent of extra ad valorem tariffs on each other's goods for an initial duration of 90 days, in a joint statement after trade discussions in Geneva over the weekend.

Both benchmarks increased by over $1 on Friday and saw a gain of over 4% last week, marking their initial weekly increases since mid-April, as a U.S. trade agreement with Britain boosted investor confidence that economic turmoil from U.S. tariffs on trading partners might be circumvented. The United States and China concluded trade discussions on a positive note on Sunday, with U.S. officials highlighting a "deal" aimed at lowering the U.S. trade deficit, while Chinese officials stated that both sides had achieved "important consensus." Constructive discussions between the two largest economies in the world may enhance crude oil demand as trade, which is presently hindered by substantial tariffs imposed by both nations, is reinstated. Toshitaka Tazawa, an analyst with Fujitomi Securities, stated that OPEC's strategy to increase production limited the rise in prices.

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Tazawa was mentioning the intentions of the Organisation of the Petroleum Exporting Countries and its partners, collectively called OPEC+, to expedite output increases in May and June, which will introduce more crude into the market. Nevertheless, a survey by Reuters revealed that OPEC's oil production slightly decreased in April. Furthermore, discussions between Iranian and U.S. negotiators aimed at settling issues regarding Tehran's nuclear program concluded in Oman on Sunday, with more negotiations scheduled, officials stated, while Tehran openly maintained its commitment to persist with uranium enrichment. A nuclear agreement between the U.S. and Iran might ease worries regarding diminished global oil supply, which could in turn impact oil prices. Last week, U.S. energy firms cut the number of oil and natural gas rigs operating to their lowest since January, energy services firm Baker Hughes said on Friday.