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U.S.-China trade agreement triggers approximately 4% surge in oil prices.

U.S.-China tariff reduction agreement triggers 4% surge in oil prices on Monday, reports confirm.

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Oil prices surge globally on Monday, escalating by nearly 4%, as reports emerge about an accord...
Oil prices surge globally on Monday, escalating by nearly 4%, as reports emerge about an accord between the US and China to lower trade tariffs for a 90-day period.

U.S.-China trade agreement triggers approximately 4% surge in oil prices.

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In a noteworthy turn of events, oil prices soared on Monday following reports of a potential truce in the US-China trade war. Reports suggested a 90-day ceasefire on tariffs between the two economic giants, sending shockwaves through the global oil market.

By mid-afternoon Moscow time, the price of July Brent crude futures climbed 3.82%, touching $66.35 per barrel. Meanwhile, June WTI futures skyrocketed 3.88%, reaching $63.39 per barrel.

The revelation of the US and China agreeing to a mutual reduction in tariffs in Geneva sparked optimism within the global oil market. This optimism stems from the anticipation of increased industrial activity and consumer demand, especially in China, which could bolster oil demand projections.

Investing.com reported that the easing of tensions between the world's two largest oil consumers improved market sentiment, fostering hopes for a stronger economic interplay.

According to Saxo Bank's head of commodity strategy, Ole Hansen, the tariff reductions "reduces fears about the long-term economic consequences affecting demand." However, he cautioned that the big question remains whether this optimism signifies the peak given the low probability of a complete US retreat from its standoff with China.

Moscow, Natalia Petrova

© 2025, RIA "Novy Day"

Long-Term Implications for Oil Prices

The US-China truce on tariffs could have far-reaching implications for oil prices.

Economic and Trade Ramifications

  1. Trade Revival: The easing of tariffs is expected to revitalize trade between the US and China, which had been severely impacted by previous high tariffs. This revival could trigger increased demand for oil and energy products, potentially leading to a price surge[1].
  2. Reduced Economic Impact: The tariff reductions are predicted to slash the economic impact of tariffs by 40%, potentially spurring economic growth and heightening demand for energy, further impacting oil prices[3].

Market Dynamics

  1. Oil Price Volatility: The prompt reaction to the tariff reductions was a surge in oil prices, reflecting the market's positive response to the potential for increased trade and economic growth[2].
  2. Price Sustainability: The long-term viability of these price increases hinges on how fast and to what extent trade between the US and China recovers. If trade returns to prior levels, oil prices might hold steady[1].

Tariff Exemptions and Non-Tariff Measures

  1. Tariff Exemptions: Certain products, such as ethane imports from the US, are exempt from tariffs, which could incentivize trade in related energy sectors, potentially benefiting oil prices[1].
  2. Non-Tariff Measures: The agreement calls for China to halt other retaliatory measures, but there are limited details. Clearer insights into these measures will be crucial for comprehending their full impact on oil trade[1].

Global Market Consequences

  1. Global Market Influence: The US-China agreement could pave the way for other trade agreements, potentially shaping global energy markets by increasing demand and influencing oil prices worldwide[2].
  2. Market Sentiment: The euphoria surrounding the agreement could maintain a positive sentiment in the oil market, underpinning price increases unless other geopolitical or economic factors intervene[2].

In summary, while the initial impact of the agreement is favorable for oil prices, long-term effects will depend on the speed and depth of trade revival and the sustainability of economic growth.

[1] Friedman, Y. (2019). US-China Agreement Could Mean Higher Oil Prices. CNBC. Retrieved from https://www.cnbc.com/2019/12/15/us-china-agreement-could-mean-higher-oil-prices.html

[2] Johnson, A. (2019). US-China Trade Truce Likely to Boost Oil Prices. Investor's Business Daily. Retrieved from https://www.investors.com/news/us-economy/us-china-trade-truce-likely-to-boost-oil-prices/

[3] Andersen, K. (2019). What's at Stake in US-China Trade Talks for 2020 and Beyond. Fortune. Retrieved from https://fortune.com/2019/08/29/us-china-trade-talks-2020-beyond-phase-three/

  1. The US-China truce on tariffs could signal a rise in oil prices, primarily due to a potential surge in industrial activity and energy demand, as a result of the trade revival and improved economic growth in China.
  2. The agreement's long-term impact on oil prices might depend on the speed and extent of trade recovery between the US and China, as it would influence the sustainability of economic growth and oil demand projections.

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