Oil prices jumped on Friday to settle higher and post their first weekly gain in three as the US and China prepared for trade talks that could ease tensions between the world’s two largest economies and boost demand.
The increase also comes after Washington announced a new trade deal with the UK.
Brent, the benchmark for two thirds of the world's oil, closed 1.7 per cent higher at $63.91 a barrel. West Texas Intermediate, the gauge that tracks US crude, leapt 1.85 per cent to at $61.02 a barrel.
From last Friday's close, Brent and WTI added about 4.3 per cent. Year-to-date, however, the benchmarks are still down by nearly 15 per cent.
“All eyes are on the first in-person meeting between US and Chinese high-level officials in Geneva tomorrow to discuss tariffs,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“The goal isn’t to seal a trade deal – that will probably take months, if not years – but to de-escalate tensions between the two countries. And who knows, maybe they’ll agree to pause tariffs while discussions continue.”
US Treasury Secretary Scott Bessent will hold talks with China's senior economic official, Vice Premier He Lifeng, in Switzerland as the two countries look to settle trade disputes that have hit oil demand.
China is a leading consumer of oil and any economic developments in Beijing affect energy markets.
The US and the UK also reached a “historic” trade deal on Thursday, supporting oil markets. As part of the deal, tariffs on British steel and aluminium exports to the US will be eliminated, while tariffs on some UK-made cars will be reduced to 10 per cent, from 27.5 per cent.
“With this deal, the UK joins the United States in affirming that reciprocity and fairness is an essential and vital principle of international trade,” US President Donald Trump said, adding that the UK would also reduce or eliminate non-tariff barriers that “unfairly discriminated against American products”.
The US is also continuing to increase pressure on Iran’s export of oil, with new sanctions imposed on three port terminal operators and a “teapot” refinery in China.
It also announced new sanctions on several companies, vessels and captains responsible for facilitating Iranian oil shipments as part of Iran’s “shadow fleet”, a US Treasury Department statement said on Thursday.
The new sanctions come as the US holds negotiations with Iran over its nuclear programme. If the two countries reach a deal, more oil supply is expected to enter the market amid sanctions relief.
Last week, Opec and its allies announced a supply boost for the month of June, that is expected to put downwards pressure on oil prices.
“The medium-term outlook remains comfortably bearish given higher supply and lower demand expectations,” Ms Ozkardeskaya said.
India, Pakistan conflict
Investors are also keeping a close eye on the current conflict between India and Pakistan and its impact on crude demand.
India, Asia's third-largest economy, is a major consumer of oil, with daily crude demand estimated at 5.4 million barrels a day, while Pakistan’s demand is about 0.25 million bpd, according to Rystad Energy.
“As tensions escalate, both countries are expected to increase crude procurement and refinery activity,” Rohan Goindi, a senior analyst at Rystad Energy, said.
“Diesel demand is likely to rise amid increased military mobilisation, while airline fuel consumption declines as airspace closures lead to rerouted flights cancellations and soaring airline ticket prices.”
