U.S./China Breakthrough Buoys Oil, But Market Still Mired In Bearish Sentiment

S&P predicts a major decline in U.S. crude production for 2026: File Image/Pixabay

An agreement between the U.S. and Washington to pause tariffs in order to formulate a possible trade deal caused crude prices on Monday to surge, buoyed too by insiders stating that demand is expected to remain resilient this year.

Brent settled up $1.05 at $64.96 per barrel, and West Texas Intermediate settled up 93 cents at $61.95; both these were the highest settlement for both benchmarks since April 28.

Under the U.S./China agreement, reciprocal tariffs for both countries would be reduced by 115 percent; the U.S. will temporarily lower its tariffs on Chinese goods from 145 percent to 30 percent, and China will reduce its levies on American products from 125 percent to 10 percent.

China also reportedly agreed to open up its country to U.S. goods, and U.S., treasury secretary Scott Bessent told media “I would imagine in the next few weeks we will be meeting again to get rolling on a more fulsome agreement.”

For his part, Trump went on to state that he may next focus on negotiating with the European Union for a fairer trade deal.

Ole Hansen, head of commodity strategy at Saxo Bank, said, “WTI and Brent may take a closer look at key resistance near $65 and $69, respectively; however, the key question is whether today’s news marks peak optimism, given the low likelihood of a full U.S. retreat from its stance on China.”

However, despite Trump’s success, the oil market remained mired in bearish sentiment: S&P Global Commodity Insights projected on Monday that U.S. oil production will dip to 13.3 million barrels per day in 2026, a 130,000-barrel decline from its 2025 forecast; if this proves to be the case, it would be just the second time in the past decade that U.S. production fell (the other time was during the Covid-19 crash).

This caused Bob McNally, president of Rapidan Energy Group, to state, “The US shale oil sector is quite gloomy: they’re battening down the hatches for a storm.”

Still, those with a direct finger on the pulse of demand were somewhat more optimistic about the health of the energy market overall: Saudi Aramco on Monday stated that it believes demand will continue to remain resilient throughout 2025, despite headwinds.