Oil Prices Rise on Trade Deal Optimism and Future Demand Expectations

Oil prices inched higher on Monday after the U.S. and European Union (EU) reached a trade agreement that alleviated tariff concerns and boosted expectations for future energy demand.

As of 21:47 ET (01:47 GMT), Brent Oil Futures for September delivery were up 0.3%, trading at $68.66 a barrel, while West Texas Intermediate (WTI) crude futures also gained 0.3%, reaching $65.36 a barrel.

The slight rebound came after both benchmarks fell to three-week lows on Friday, driven by expectations of increased oil supply from Venezuela.

U.S.–EU Trade Agreement Boosts Risk Appetite

The market saw improved sentiment following the announcement of a U.S.–EU framework trade deal on Sunday. This agreement includes a 15% tariff on EU goods entering the U.S., down from the previously proposed 30%, and signals a positive shift in trade relations.

In addition to the tariff reduction, the deal includes provisions for the EU to purchase $750 billion worth of U.S. energy over several years, including crude oil and liquefied natural gas (LNG). The EU also committed to purchasing hundreds of billions of dollars in U.S. military equipment and making $600 billion in investments.

This trade deal was viewed as a boost for global economic activity and cross-border commerce, driving up expectations for higher energy demand through increased transportation and industrial energy use.

The deal’s energy provisions also supported oil prices, strengthening long-term demand expectations for U.S. energy exports, especially crude oil and LNG.

Cautious Sentiment Ahead of August 1 Tariff Deadline

While the trade deal provided a boost to oil markets, investor sentiment remained cautious as they eyed President Donald Trump’s August 1 tariff deadline. Traders are awaiting further clarity on U.S. trade policy, particularly with respect to ongoing trade tensions.

OPEC+ Output Hike and Fed Meeting Weigh on Prices

Gains in oil prices were tempered by expectations of rising global supply. OPEC+ is expected to modestly increase output in August, and there are signs that Venezuelan crude could re-enter the market if U.S. sanctions are eased.

An OPEC+ committee is set to meet on Monday to assess the oil market ahead of the August 3 meeting, where production policy for September will be decided. Reports indicate that the cartel is likely to announce another output hike.

U.S. Fed Meeting and Economic Data

Additionally, the market is awaiting updates from the U.S. Federal Reserve as the central bank begins its two-day policy meeting on Tuesday. The Fed is widely expected to leave interest rates unchanged, but traders are closely watching for signals on potential rate cuts later this year.

Later this week, attention will turn to key U.S. economic data, including the June PCE inflation index and the July jobs report, which could provide more insight into the health of the U.S. economy and its potential impact on energy demand.