Oil prices surged on Thursday, buoyed by renewed optimism over global trade prospects after U.S. President Donald Trump announced a new trade framework with the United Kingdom. The agreement lifted market sentiment, raising expectations for progress in more complex negotiations with China.
West Texas Intermediate (WTI) crude gained 3.2%, settling at $59.91 per barrel in New York, while Brent crude for July delivery rose 2.8% to close at $62.84 per barrel.
The newly announced U.S.-UK agreement includes provisions to expedite American goods through British customs and reduce trade barriers on a wide range of exports, such as agricultural products, chemicals, energy commodities, and industrial goods—including ethanol. However, the deal remains limited in scope and retains a 10% baseline tariff.
“The British deal is fueling confidence that more comprehensive trade agreements, particularly with China, are achievable,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. She added, “The real driver of risk assets today appears to be renewed optimism around progress in the U.S.–China trade talks,” although overall sentiment toward crude oil remains “overwhelmingly bearish.”
Investors are eyeing upcoming U.S.-China negotiations this weekend, especially after Trump signaled the possibility of reducing the 145% tariff currently imposed on Chinese goods if talks proceed positively. China remains the world’s largest importer of crude oil, making its trade relationship with the U.S. pivotal for global energy demand.
Despite the gains, oil prices have generally trended lower since the beginning of Trump’s presidency, driven by concerns that protracted trade tensions would curb global economic growth and depress energy consumption. Compounding this bearish outlook, OPEC+ has begun restoring previously idled supply faster than anticipated, putting additional pressure on prices.
In the U.S., shale producers are responding to falling prices by scaling back investment in the Permian Basin. However, some signs of bullish sentiment emerged in the options market, where traders showed interest in Brent $95 September call options, indicating bets on a sharp rebound.
Meanwhile, geopolitical tensions remain a key factor. On Thursday, the U.S. imposed sanctions on a third Chinese “teapot” oil refinery and several other entities linked to Iran, just ahead of a fourth round of nuclear talks between Washington and Tehran. According to Citigroup analysts, failure to reach an agreement could drive Brent crude toward the $70 mark.
Adding to the positive sentiment, the U.S. Energy Information Administration (EIA) reported that domestic crude inventories fell for a second consecutive week, reaching their lowest level since late March. Stockpiles at the crucial Cushing, Oklahoma, storage hub also declined.
With trade optimism gaining traction and supply dynamics in flux, the oil market appears poised for continued volatility in the coming weeks.
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