Oil prices benefit from easing of trade conflict - Commerzbank

The surprising announcement of a significant reduction in reciprocal tariffs between the US and China led to a sharp rise in oil prices yesterday. Brent rose by up to 4% to more than $66 per barrel, WTI to $63.6 per barrel, Commerzbank's commodity analyst Carsten Fritsch notes.

US-China trade talks benefit oil prices

"Prices had already risen noticeably on Friday in optimistic anticipation of the trade talks that took place last weekend. The agreed tariff reduction will initially apply for 90 days. From tomorrow, the US will levy a tariff of 30% on imports from China, while China will levy a tariff of 10% on imports from the US. The additional 10% tariff on US crude oil, which China imposed in February in response to previous US tariffs, is likely to remain in place."

"The risk to oil demand has decreased as a result of the de-escalation of the trade conflict. However, it is crucial that a longer-term solution to the trade conflict between the two most important oil-consuming countries is found in the next three months. It is conceivable that increased crude oil imports by China from the US will be part of an agreement. The price increase has also caused the backwardation at the front end of the Brent futures curve to become somewhat stronger again."

"The price difference between the first two forward contracts widened to 50 US cents at times. In addition, the first six contracts are falling, i.e. are in backwardation. Last week, only the first four contracts were backwardated. The fact that OPEC+ is significantly expanding its supply has been pushed to the side. However, this fact is likely to have contributed to oil prices giving up most of yesterday's gains after the initial euphoria subsided, with Brent trading at $65 again."