Oil prices edged up from three-week lows in Asian trading on Monday after the U.S. and European Union reached a trade agreement that eased tariff concerns and boosted expectations for future energy demand.
Brent Oil Futures expiring in September were up 0.3% at $68.66 a barrel by 21:47 ET (01:47 GMT), while West Texas Intermediate (WTI) crude futures also gained 0.3% to $65.36.
The slight rebound came after both benchmarks hit three-week lows on Friday, driven by expectations of increased oil supply from Venezuela.
“A trade deal between the US and EU proved positive for sentiment this morning in the oil market. However, attention will likely turn to OPEC+ output policy from September,” ING analysts said in a note.
US-EU framework deal boosts trade sentiment Sentiment improved following news of a broad U.S.–EU framework deal announced on Sunday. The agreement includes a 15% tariff on EU goods entering the U.S., down from the 30% originally proposed.
It also calls for the EU to purchase $750 billion worth of U.S. energy over several years. In addition, the EU committed to buying hundreds of billions of dollars in U.S. military equipment and making $600 billion in investments.
Easing trade tensions boosts economic activity and cross-border commerce, which in turn drives up oil demand through increased transportation and industrial energy use.
The energy portion of the deal also supported oil prices by strengthening long-term demand expectations for U.S. exports, particularly liquefied natural gas and crude oil.
3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads. Oil markets were also supported by improved risk sentiment as fears of a near-term trade war eased. Still, investors cautiously eyed President Donald Trump’s August 1 tariff deadline for further clarity on U.S. trade policy.
OPEC+ output hike in focus; Fed decision awaited Still, gains were capped by expectations of higher global supply. The Organization of the Petroleum Exporting Countries and its allies (OPEC+) is expected to modestly raise output in August, while Venezuelan crude could re-enter the market under a potential easing of U.S. sanctions.
An OPEC+ committee is set to meet later on Monday to review the oil market ahead of the August 3 meeting, where production policy for September will be determined. Media reports have shown that the cartel is expected to hike output again.
"We expect that OPEC+ will at least complete the full return of 2.2m b/d of the additional voluntary supply cuts by the end of September," ING analysts said.
"This would work out to a supply hike in September of at least 280k b/d. However, there is clearly room for a more aggressive hike," they added.
Investors are also watching for developments from the Federal Reserve. The U.S. central bank begins its two-day policy meeting on Tuesday and is expected to keep interest rates steady. Traders are looking for signals on the possibility of a rate cut later this year.
Later this week, the market will focus on key U.S. economic data, including the June PCE inflation index and the July jobs report.
