A cautious sense of optimism returned to oil markets on Monday. As talks between the world's two largest economies resumed, traders began to believe that smoother trade relations could finally lift energy demand. Oil prices were little changed on Monday as investors anticipated new trade talks between the United States and China in London. Brent crude was up 39 cents, or 0.59%, at $66.86 a barrel, and U.S. West Texas Intermediate rose 36 cents, or 0.56%, to $64.94.
Both benchmarks had shown solid performance in the previous week, as Brent gained about 4% and WTI posted a more than 6% increase, ending two weeks of declines. The shares were boosted by renewed confidence that easing trade tensions could support global economic growth and increase oil demand.
The recent trade talks followed an optimistic telephonic conversation between the U.S. and Chinese leaders. There is now a growing expectation that an end to the tensions could help improve the outlook for global trade, which has been affected this year by tariffs and weak export data from China.
But traders are still cautious. China's export growth hit a three-month low in May, and factory gate prices fell to a two-year low. In addition, China took in the lowest volume of crude oil in four months as many refiners have started scheduled maintenance work. These developments occurred as fresh worries over short-term demand from one of the world's biggest oil consumers prompted another selloff.
Meanwhile, there are supply-side issues also at play. Canadian oil producers are facing wildfires, which are causing temporary cutbacks and putting upward pressure on prices, and risks from Venezuela, Iran, and broader Middle East tensions continue to sway the market.
While OPEC+ is set to pump an additional 400,000 barrels a day next month, some of the effect could be offset by seasonal demand gains in the Northern Hemisphere and potential disruptions. Analysts also state that the oil market may remain relatively balanced in the next quarter, with rising sales potentially marking a turning point by year-end.
