Oil prices went up on Monday because U.S. and Chinese officials agreed on a basic plan (a “framework”) for a future trade deal. This reduced fears that tariffs and export limits between the world’s two biggest oil users would hurt the global economy. Reuters reported.
Brent crude rose 47 cents (0.71%) to $66.41 a barrel, and U.S. West Texas Intermediate crude rose 44 cents (0.72%) to $61.94. Both had already jumped last week by 8.9% and 7.7%, after new U.S. and EU sanctions on Russia.
Reuters stated that confidence in oil prices grew for two main reasons: the easing of tensions between the United States and China, and the new Western sanctions on Russia. Better U.S.–China relations raised hopes for stronger global trade.
Why did prices go up, not down?
Prices went up because people think the trade deal between the U.S. and China will help the world economy.
When countries trade more, factories make more products, ships move more goods, and people travel more.
All of this uses more oil for transport, machines, and energy.
So, the market believes oil demand will grow. At the same time, the amount of oil in the market has not increased, so prices go higher.
In contrast, oil prices may go down. Reuters said that if sanctions on Russian energy do not work, Russia could still sell more oil. That would increase oil supply, leading to an oversupply that might push prices down later.
For oil exporters, that’s bad news; however, for importers like Pakistan, it’s positive, as the country is heavily import-dependent and relies on imported crude oil to meet its energy needs.
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