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(Bloomberg) — Oil steadied after after a weekly surge as a renewed round of US-China trade talks offered the potential for reduced global tensions.
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Brent traded above $66 a barrel after jumping 4% last week, while West Texas Intermediate was near $65. Negotiators from the US and China are set to hold talks in London on Monday, raising the possibility the two largest economies can make progress on disputes that have rattled markets this year.
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Crude has retreated by 11% in London this year on concern that escalating trade tensions could hinder global growth, putting a brake on energy demand. At the same time, the OPEC+ alliance has been ramping up production at a faster-than-anticipated pace, underpinning fears that there’ll be a glut of oil in the second half that will weigh on prices.
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While oil has been dragged lower in President Donald Trump’s second term, price swings have lessened since mid-May as traders weigh signs of progress in trade talks, an uptick in consumption during the northern-hemisphere summer driving season, as well as geopolitical risks in Iran and Russia.
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“If the UK meeting continues to signal optimism, it could weaken the negative economic impact of the trade war,” said Gao Mingyu, Beijing-based chief energy analyst at SDIC Essence Futures Co. “After the short-term bearish impact of OPEC+’s July ouptut hike was digested, improving macro sentiment, stronger seasonal demand, and lingering geopolitical risks have all provided support,” she added.
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Futures have traded in a band of less than $4 since the middle of May, with a gauge of volatility near the lowest since early April. Meanwhile, Brent’s prompt spread – the difference between its two nearest contracts — has widened in backwardation in recent weeks, a bullish pattern.
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