Oil gains on easing tariff tensions, but OPEC+ supply outlook limits rally

SINGAPORE: Oil prices climbed on Monday after the US reached a trade deal with the European Union and signaled it may extend a pause on tariffs with China. The developments helped ease concerns that rising trade barriers could slow economic growth and weaken fuel demand.

By 0035 GMT, Brent crude had risen 22 cents, or 0.32 per cent, to $68.66 a barrel. US West Texas Intermediate (WTI) was also up 22 cents, or 0.34 per cent, to $65.38 a barrel.

“The trade agreement between the US and EU, along with signs of continued tariff relief with China, is lifting sentiment in both financial and oil markets,” said Tony Sycamore, analyst at IG Markets.

On Sunday, the US and EU agreed on a framework that sets a 15 per cent import tariff on most EU goods — half the rate that had previously been threatened. The deal avoided a larger trade conflict between the two allies, who together account for nearly a third of global trade. A deeper dispute would likely have hurt demand for oil.

Meanwhile, senior US and Chinese negotiators are due to meet in Stockholm on Monday to discuss extending the current tariff truce before it expires on August 12.

Oil prices had ended lower on Friday, hitting their weakest levels in three weeks. That was due to concerns over slowing trade and the possibility of more supply entering the market from Venezuela.

Sources at Venezuela’s state-run oil company PDVSA said the firm is preparing to restart joint venture operations under conditions similar to those allowed during the Biden administration. The resumption would follow once President Donald Trump reinstates authorisations that let partners export oil through swap deals.

Despite Monday’s modest gains, oil prices were kept in check by expectations that OPEC and its allies might ease supply restrictions further.

A key OPEC+ monitoring committee is scheduled to meet at 1200 GMT. Four delegates said the group is unlikely to change its existing plan, which allows eight members to increase output by 548,000 barrels per day in August. One other source said it was still too early to confirm.

Producers are eager to regain market share, and the seasonal rise in demand is helping to absorb additional volumes.

Analysts at JP Morgan said global oil demand rose by 600,000 barrels per day in July compared to a year earlier, while oil inventories increased by 1.6 million barrels per day.

In the Middle East, Yemen’s Houthi rebels said on Sunday they would target any ships belonging to companies that do business with Israeli ports, regardless of nationality. They described it as part of the fourth phase of their operations in response to the conflict in Gaza.