Oil prices rebound as hopes rise for US-China talks to ease trade tensions

SINGAPORE: Oil prices bounced back on Monday after hitting their lowest levels in five months, with traders betting on potential progress in upcoming talks between the United States and China. Investors are hopeful that a meeting between Presidents Donald Trump and Xi Jinping could help calm trade tensions between the world’s two largest economies and biggest oil consumers.

Brent crude futures climbed 92 cents, or 1.47 percent, to $63.65 a barrel by 0408 GMT, recovering from a sharp 3.82 percent decline on Friday that took prices to their lowest since May 7.

Traders eye Trump-Xi meeting

Analysts believe the rebound is mainly driven by profit-taking and renewed optimism about a possible breakthrough in trade negotiations. Independent market analyst Tina Teng said traders appeared to be betting on the so-called “TACO trade”, short for “Trump always chickens out”, after both Trump and Vice President JD Vance hinted that the newly announced tariffs might be used as a bargaining chip rather than a firm policy shift.

“However, volatility is expected to remain,” Teng noted. “I do not see oil or other risk assets reversing their earlier losses too quickly.”

The recent flare-up in trade tensions began after China tightened its export controls on rare earth materials, prompting Trump to announce 100 percent tariffs on Chinese goods bound for the US. He also unveiled new export restrictions on critical software, effective November 1.

Hope for a breakthrough

The measures have raised expectations that both countries might use the upcoming Asia-Pacific Economic Cooperation (APEC) forum in South Korea as a chance to reset relations. US Trade Representative Jamison Greer confirmed that a Trump-Xi meeting on the sidelines of the summit could still take place later this month.

Goldman Sachs analysts said the most likely outcome is a mutual pullback from the harshest measures, potentially leading to a continued pause in the tariff escalation first agreed in May. However, they warned that the risk of renewed hostilities remains, which could temporarily push tariffs or export restrictions higher.

China’s crude imports rise

Meanwhile, China’s crude imports in September rose 3.9 percent from a year earlier to 11.5 million barrels per day, according to customs data. Refiners were running at their highest capacity levels this year, and stockpiling continued amid global market uncertainty.

Middle East developments

In a separate development, Trump announced on Sunday that the Gaza war had ended as he prepared to travel to Israel. His visit is expected to coincide with the release of Israeli hostages and Palestinian prisoners as part of a fragile ceasefire agreement brokered by Washington.