Oil jumped by 3% early on Monday after the United States and China agreed to slash tariffs on each other, easing concerns about global trade and the economy.
As of 6:52 a.m. on Monday, the U.S. benchmark, WTI Crude, was up by 3.13% at $62.93. The international benchmark, Brent Crude, moved up above $65 per barrel and traded at $65.79, up by 2.93% on the day.
The market was expecting on Monday the outcome of the initial U.S.-China trade talks in Geneva this weekend.
Early on Monday, the White House announced that the United States and China will each lower tariffs by 115% while retaining an additional 10% tariff. Other U.S. measures will remain in place.
The U.S. and China will suspend the tariffs for 90 days except the 10% baseline rate.
“After taking the aforementioned actions, the Parties will establish a mechanism to continue discussions about economic and trade relations,” the United States and China said in a joint statement at the end of the talks in Geneva this weekend.
He Lifeng, Vice Premier of the State Council of China, U.S. Secretary of the Treasury, Scott Bessent, and United States Trade Representative, Jamieson Greer, will continue to hold future discussions.
“Crude oil jumps together with other pro-cyclical commodities on news the U.S. and China will temporarily lower tariffs on each other's products, thereby reducing fears of a prolonged economic fallout hurting demand,” Ole Hansen, head of commodity strategy at Saxo Bank, commented on Monday.
“WTI and Brent may take a closer look at key resistance near $65 and $69, respectively. However, the key question is whether today’s news marks peak optimism, given the low likelihood of a full U.S. retreat from its stance on China,” the strategist noted.
The oil price jump was mirrored by the equity markets on Monday, with the Dow futures also soaring in the wake of the news that the U.S. and China are backing down from 100%-plus tariffs, for now.
By Tsvetana Paraskova for Oilprice.com
