Oil prices clawed back some gains on Monday after hitting five-month lows in the previous session as investors hoped potential talks between the presidents of the US and China could ease trade tensions between the world’s two largest economies and oil consumers.
Brent crude futures rose 87 cents, or 1.39 per cent, to $63.60 a barrel by 0045 GMT after settling down 3.82 per cent on Friday to the lowest since May 7.
US West Texas Intermediate crude was at $59.77 a barrel, up 87 cents, or 1.48 per cent, following a 4.24 per cent loss to reach its lowest since May 7.
US-China trade tensions flared up last week after China expanded its rare earth export controls and drew a response from US President Donald Trump on Friday to impose 100 per cent tariffs on China’s US-bound exports, along with new export controls on “any and all critical software” by November 1.
The moves come ahead of a potential Trump-Xi meeting on the sidelines of the Asia-Pacific Economic Cooperation forum in South Korea, which US Trade Representative Jamison Greer said could still happen later this month.
“The key question for markets is whether these are ultimately implemented, with severe effects on global supply chains and especially high-tech production, or remain just efforts to gain negotiating leverage ahead of bilateral talks on the sidelines of the APEC meeting in South Korea late this month,” Goldman Sachs analysts said in a note.
“The most likely scenario seems to be that both sides pull back on the most aggressive policies and that talks lead to a further – and possibly indefinite – extension of the tariff escalation pause reached in May,” they said, although there is still the risk of trade tensions escalating that may lead to higher tariffs or more serious export restrictions, at least temporarily.
Oil prices tumbled in March and April during the height of trade tensions between the two countries.
In the Middle East, Trump declared on Sunday that the Gaza war has ended as he heads to Israel ahead of the expected release of Israeli hostages and Palestinian prisoners as part of the fragile ceasefire he brokered.
