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Oil prices extended gains on Friday, building on a sharp rally in the prior session, as easing trade tensions between the United States and China and a fresh trade agreement between the U.S. and Britain lifted market sentiment. However, concerns over increased OPEC+ supply and geopolitical risks in South Asia continued to cloud the outlook.
Brent crude futures rose 23 cents, or 0.37%, to $63.07 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 21 cents, or 0.35%, to $60.12 a barrel by 05:07 GMT. On Thursday, both benchmarks jumped nearly 3%, marking their strongest daily performance in over two weeks.
Trade Hopes Fuel Optimism
The uptick in oil was supported by news that U.S. Treasury Secretary Scott Bessent is scheduled to meet Chinese Vice Premier He Lifeng in Switzerland on May 10, marking the first high-level discussions in months aimed at deescalating the prolonged tariff dispute between the world’s two largest economies—and top oil consumers.
Adding to the momentum, fresh data out of China showed exports in April grew faster than expected, while the contraction in imports slowed. The trade figures offered a tentative sign of stabilization in China’s economy ahead of the talks with the U.S.
Meanwhile, Washington and London announced a breakthrough trade agreement late Thursday. Under the deal, the U.K. will lower tariffs on U.S. imports to 1.8% from 5.1%, while the U.S. agreed to reduce duties on British cars but maintained a 10% tariff on most other goods.
While the deal is expected to have a limited direct impact on oil demand, analysts view it as a positive sign for broader trade normalization.
Mixed Supply Signals
Despite improving sentiment on the demand side, the supply outlook remains a key source of pressure for oil prices.
OPEC+—the alliance of the Organization of the Petroleum Exporting Countries and allied producers—plans to increase output in the coming months. A Reuters survey showed OPEC’s crude oil output slipped slightly in April, as declines in Libya, Venezuela, and Iraq outweighed planned production hikes. However, the group’s broader strategy still points to higher supply through mid-year.
Meanwhile, the U.S. has tightened enforcement of sanctions on Iranian oil exports, targeting two small Chinese refiners accused of purchasing sanctioned crude. The move may limit available global supply, although its overall market impact is expected to be modest due to Iran’s ability to reroute cargoes under alternative labels.
Geopolitical Tensions Add a Risk Premium
On the geopolitical front, tensions between India and Pakistan escalated after Pakistan’s military launched multiple attacks along the western border, according to a statement from the Indian army early Friday.
Analysts at Rystad Energy noted that the rising conflict could drive both countries to increase crude procurement and refinery activity, adding a modest risk premium to oil markets in the near term.
Outlook
While near-term oil prices are seeing support from trade-related optimism and geopolitical developments, the market remains sensitive to both OPEC+ supply strategies and the outcome of U.S.-China trade talks. Traders will also be closely watching upcoming economic indicators from major economies for further signals on global demand.
