Oil prices jumped nearly 2 per cent on Friday to post their first weekly gain in three weeks amid hopes for a US-China deal on tariffs and a better than expected American jobs report.
Brent, the benchmark for two thirds of the world's oil, rose 1.73 per cent to settle at $66.47 a barrel. West Texas Intermediate, the gauge that tracks US crude, closed 1.91 per cent higher at $64.58 a barrel.
Both Brent and WTI, which reversed losses on Friday, posted a weekly gain of about 6 per cent. For the year, they are down 11 per cent and 10 per cent, respectively.
Crude futures posted modest gains on Thursday, but the market became more optimistic after a phone call between US President Donald Trump and China's Xi Jinping, who agreed to resume negotiations on trade and tariffs.
The US and China are the main protagonists in the global trade war, imposing tit-for-tat levies on imports.
However, they agreed to a detente on May 12, with Washington lowering its 145 per cent tariffs on Chinese imports to 30 per cent, while Beijing dialled down its levies from 125 per cent to 10 per cent.
The call between the two leaders, a sign of progress in their countries' negotiations, “prompt[ed] relief after a recent escalation in tensions”, analysts at Vanda Insights said.
Adding to the optimism was a US jobs report that showed the world's biggest economy adding 139,000 jobs in May, beating analyst estimates, the Labour Department said on Friday. The unemployment rate held steady at 4.2 per cent.
Crude prices took a hit after Mr Trump's sweeping global tariffs announced on April 2 disrupted stock markets and reignited fears of a global recession. However, with many of the tariffs temporarily paused and the US seeking deals with its partners, the uncertainty has reduced.
A positive sign for oil prices is the decline in US oil inventories, indicating demand for the commodity remains strong.
At the moment, market fundamentals seem to remain balanced, especially after Opec+ last month agreed to increase its monthly oil output by 411,000 barrels a day for July, the same as in May and June, analysts at Fitch unit BMI said.
The decision was “in view of a steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories”, the group said.
Opec+ noted that gradual increases may be paused or reversed “subject to evolving market conditions” and “flexibility will allow the group to continue to support oil market stability”.
Analysts said the move by Opec+ may be a gesture to mollify Mr Trump, who has called for lower crude prices.
BMI analysts, however, cautioned that any slower economic growth later in 2025 “will see markets tip into oversupply”. They also expect a similar production rise for August, “should market conditions and prices remain steady”.
“But both weaker demand for oil and increased production from both Opec+ and non-Opec producers will add to downside price pressures in the coming quarters,” BMI said.
Upstream oil investments are forecast to be less than $570 billion in 2025, which would be a 6 per cent decline, marking the first annual drop since the Covid-induced slide in 2020 and the largest since 2016, the International Energy Agency said on Thursday.
The decrease is being attributed to lower oil prices and demand expectations, amid economic uncertainties, the Paris-based IEA said.
