Oil jumped as much as 4% before paring gains Monday after a US-China trade truce sent the overall stock market and commodities higher.
West Texas Intermediate (CL=F) futures rallied over 2% to hover near $62.50 per barrel. Brent crude (BZ=F), the international benchmark, also rebounded to trade above $65.
Monday’s oil price rally was exacerbated by a likely short position covering after talks between the US and China resulted in a 90-day pause on tariffs and substantial reduction of duties.
Read more: What Trump’s tariffs mean for the economy and your wallet
“For traders it’s a ‘risk back on’ signal which is triggering some short covering in crude,” Dennis Kissler, senior vice president at BOK Financial, said in a client note. Investors had feared the trade war would spark an economic slowdown, impacting oil demand.
In other news, oil giant Saudi Aramco announced over the weekend it saw profits plunge last quarter, fueling speculation that Saudi Arabia, the leader of the Organization of Petroleum Exporting Countries and its allies (OPEC+), could push to curtail some of the cartel’s recent production hike promises.
Futures are down more than 12% year to date as fears of lessened demand from a global trade war and expectations of more supply from OPEC have weighed on prices.
Last week US shale producer Diamondback (FANG) warned domestic production had likely peaked and would decline in the coming quarters, given the current prices.
Goldman Sachs analysts see downside risks to oil if OPEC+ moves forward with its output increases or even decides to raise in July too.
“We expect solid supply growth outside US shale to weigh further on prices and on US shale supply, and update our estimates of the (mostly downside) risks to prices,” Goldman’s Daan Struyven and his team wrote on Sunday night.
The analysts forecast Brent to edge down and average $60 in the rest of 2025, with WTI averaging $56.
Ines Ferre is a Senior Business Reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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Correction: A previous version of this article misspelled Daan Struyven’s name. We regret the error.
