Brent crude oil futures surged nearly 3% to approach $66 per barrel on Monday, hitting a two-week high, as investor sentiment was buoyed by the landmark trade breakthrough between the U.S. and China.
Brent surges by nearly 3% on Monday
The agreement, reached over the weekend in Switzerland, signaled a significant cooling of tensions between the world’s two largest oil consumers, alleviating fears of prolonged demand destruction. Under the deal, both nations agreed to a 90-day truce during which the U.S. will reduce its punitive tariffs on Chinese goods from 145% to 30%, while China will slash levies on U.S. imports from 125% to 10%. The move sparked a broad rally across risk assets and commodities, lifting oil prices on hopes that revived trade flows and improved business confidence would bolster global economic activity and fuel demand for crude.
However, the rally was tempered by lingering supply-side pressures. OPEC+ signaled intentions to accelerate production increases over the next two months, as the alliance responds to earlier calls from major importers to ease market tightness and support fragile global economic recovery efforts. Reports suggest that additional barrels from Saudi Arabia, the UAE, and Iraq could enter the market as soon as late May, further weighing on the medium-term oil price outlook.
Potential US-Iran developments effects
Adding to the complex supply narrative, hopes for progress in U.S.-Iran nuclear diplomacy re-emerged after negotiators from both sides concluded preliminary talks in Oman on Sunday. If successful, a deal could pave the way for the lifting of U.S. sanctions on Iranian crude, potentially unlocking up to 1 million barrels per day of additional supply into the global market. While no agreement has been reached yet, both Washington and Tehran indicated that further negotiations would continue in the coming weeks, keeping markets on alert for any developments.
Elsewhere, the geopolitical backdrop remained tense, as ceasefire talks between Israel and Iran-backed proxies continued to face challenges, although some easing of immediate Middle East supply risks offered marginal relief to traders. Meanwhile, investors are also awaiting key economic data releases from China and the U.S. later this week, which could provide further insights into the trajectory of global oil demand following the tariff détente.
