Oil prices rose modestly on Monday, supported by a weaker U.S. dollar and growing investor optimism over ongoing U.S.-China trade talks in London. The potential for a deal between the world’s two largest economies raised hopes of an improved global economic outlook and stronger oil demand.
Market Movement:
- Brent crude futures rose 44 cents (0.7%) to $66.91 per barrel
- U.S. West Texas Intermediate (WTI) crude increased by 59 cents (0.9%) to $65.17 per barrel
Last week, Brent crude gained 4%, and WTI jumped 6.2%, as optimism over trade developments increased risk appetite among investors.
A decline in the U.S. dollar index by 0.2% helped support crude prices. A weaker dollar makes dollar-denominated commodities like oil cheaper for foreign buyers, thereby boosting demand.
President Donald Trump and Chinese President Xi Jinping spoke last Thursday, ahead of a key meeting between U.S. and Chinese trade officials on Monday in London. The talks are aimed at easing trade tensions, which have strained the global economy and pressured oil demand.
“Discussions between the U.S. and Chinese today regarding the tariffs are deterring selling interest,” said analysts at Ritterbusch and Associates.
Mixed Signals from China’s Economy
Despite optimism over trade, recent Chinese economic data reflected ongoing challenges:
- Export growth slowed to a three-month low in May due to existing U.S. tariffs.
- Factory gate deflation worsened to a two-year low, indicating weak domestic demand.
- Crude oil imports in May fell to a four-month low, as state-owned and independent refiners undertook scheduled maintenance.
“Bad timing for crude oil, which was testing the top of the range and knocking on the door of a technical break above $65,” said Tony Sycamore, market analyst at IG.
OPEC+ Output Rises but Remains Within Control
The OPEC+ group increased oil production slightly in May, but the rise was smaller than expected, according to a Reuters survey:
- Total OPEC production reached 26.75 million barrels/day, up 150,000 bpd from April.
- Saudi Arabia made the largest increase, while Iraq made cuts to offset prior overproduction.
- UAE and Saudi Arabia raised output within permitted limits.
Despite the increase, the prospect of a U.S.-China trade deal remains the dominant market driver, outweighing concerns about near-term supply growth.
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