Oil prices edged higher on Monday following a trade agreement between the United States and the European Union, and indications of a possible extension to a tariff truce with China, easing fears that higher levies could hamper global economic activity and fuel demand.
Brent crude futures rose by 22 cents, or 0.32 per cent, to 68.66 dollars per barrel by 0035 GMT, while US West Texas Intermediate (WTI) crude increased by 22 cents, or 0.34 per cent, to 65.38 dollars per barrel.
According to IG Markets analyst Tony Sycamore, the US-EU trade agreement and a potential continuation of the US-China tariff pause are currently bolstering financial markets and oil prices.
The US and EU reached a framework trade deal on Sunday, which includes a 15 per cent import tariff on most EU goods, half the previously threatened rate. The agreement helps avert a deeper trade conflict between two major economies responsible for nearly one-third of global trade, a confrontation that could have suppressed fuel consumption.
Meanwhile, senior US and Chinese negotiators are scheduled to meet in Stockholm on Monday to explore the possibility of extending the current tariff pause before the 12 August deadline.
Oil prices had settled at a three-week low on Friday due to ongoing global trade worries and expectations of increased oil supply from Venezuela.
Venezuela’s state oil company, PDVSA, is preparing to resume operations at joint ventures under conditions similar to previous Biden-era licences. These preparations come amid expectations that former President Donald Trump may reinstate authorisations for partner firms to operate and export oil via swaps, according to company sources.
Despite Monday’s modest gains, the potential easing of supply restrictions by OPEC+ remains a limiting factor.
A monitoring panel of the Organisation of the Petroleum Exporting Countries (OPEC) and allied producers is set to meet at 1200 GMT on Monday. Four OPEC+ delegates said last week it was unlikely the panel would recommend changing current plans for eight member countries to boost production by 548,000 barrels per day in August. Another source noted it was still too early to be certain.
The producer group is eager to reclaim market share, supported by rising summer demand that is helping to absorb additional supply.
Analysts at JP Morgan stated that global oil demand in July rose by 600,000 barrels per day year-on-year, while oil inventories globally increased by 1.6 million barrels per day.
In related developments, Yemen’s Houthi group announced on Sunday it would target ships of any nationality if operated by companies doing business with Israeli ports. The warning forms part of what they termed the fourth phase of their military operations against Israel in connection with the ongoing Gaza conflict.
(NAN)