The oil prices have reversed some of their gains on Monday, as the oil prices have reached five-month lows in the preceding session, since investors were optimistic that possible discussions between the U.S. and Chinese presidents would defuse the tension in trade between the two biggest economies in the world and consumers of the oil product.
Brent crude futures increased 87 cents, or 1.39 percent, to $63.60 a barrel by 0045 GMT after closing down 3.82 percent on Friday to the lowest since May 7.
The U.S. West Texas Intermediate crude rose 87 cents or 1.48 percent to $59.77 a barrel after falling by 4.24 percent to the lowest since May 7.
Trade concerns escalated between the U.S and China last week, when China widened its rare earth export quotas and the U.S. President Donald Trump responded on Friday by threatening to impose a 100 percent tariff on the U.S.-bound exports of China, as well as to institute additional export quotas on all and “any and all critical software” by November 1.
The actions precede a possible Trump-Xi meeting on the margins of the Asia-Pacific Economic Cooperation forum in South Korea, which U.S. Trade Representative Jamison Greer indicated would still take place later this month.
In a note, Goldman Sachs analysts reported that “The key question for markets is whether these are ultimately implemented, with severe effects on global supply chains and especially high-tech production, or remain just efforts to gain negotiating leverage ahead of bilateral talks on the sidelines of the APEC meeting in South Korea late this month.”
They further noted that though there is also the threat that trade tensions may escalate to result in higher tariffs or more serious restrictions on exports, at least in the short term and stated, “The most likely scenario seems to be that both sides pull back on the most aggressive policies and that talks lead to a further – and possibly indefinite – extension of the tariff escalation pause reached in May.”
During the peak of trade tensions between the two countries, oil prices dropped in March and April.
Trump announced in the Middle East on Sunday that the war with Gaza had been completed when he visited Israel before the anticipated set free of Israeli hostages and Palestinian prisoners as part of the shaky peace he had negotiated.
