On Monday, as Russia confirmed that OPEC and its allies would extend their production cut agreement for nine months, U.S. crude prices jumped in early morning trade. It was during a ceasefire with the ongoing trade conflict between the U.S. and China concerns helped comfort the slowing global economy.
The benchmark for oil prices outside the U.S., Brent crude futures climbed $1.84, or 2.8%, to $66.58. Also, New York-traded West Texas Intermediate crude futures jumped $1.75, or 3.0%, to $60.22 a barrel.
In an early morning note, an analyst at ING Group said, “A move towards extending the deal, along with constructive talks between Presidents Trump and Xi at the G20 summit which would see the U.S. holding off from imposing new tariffs, has proved constructive for the oil market this morning.”
On Monday, extension of existing output cuts of 1.2 million barrels per day for a full nine months was unanimously agreed to by all the members of OPEC and non-member allies, known as OPEC+. It was said and confirmed by the Russian Energy Minister Alexander Novak.
According to news reports, referring to the Joint Ministerial Monitoring Committee that oversees compliance with the agreement, Minister Alexander Novak said, “Everyone supported the general proposal.”
Over the weekend, when Iran gave its approval and Saudi and Russian leaders met on the sidelines of the G20 summit, the announcement came after.
After the meeting of its members, OPEC has tentatively scheduled a press conference.
On Tuesday, the full ministerial meeting of OPEC+ remains scheduled to take place.
The U.S. President Donald Trump pledged to hold off on the implementation of new tariffs and also eased restrictions on tech company Huawei in order to reduce tensions with Beijing.
Furthermore, the U.S. and China agreed to restart trade talks. Also, support for oil prices will be provided.
Meanwhile, unspecified new purchases of U.S. farm products and returning to the negotiating table were agreed by China.
The global economy and the demand for oil will have a negative impact. The pause of the escalating trade tensions reduces concerns of the dispute between the two countries.
Lastly, natural gas futures plunged 1.7% to $2.2684 per million British thermal unit.
Gold Prices Glide
On the flip side, on Monday, gold prices plunged. As a trade ceasefire between the U.S. and China boosted risk appetite, dampening demand for the safe-haven precious metal, it dropped below $1,400.
A strategist in a note explained, “We view the latest drop in gold as a healthy correction following four weeks of heavy buying.”
As the third quarter kicks off, this strategist said there are reasons for caution.
In addition, he also said, “One of them being our belief that the low point in global growth is still ahead of us, not behind us,” he said. “On that basis, we view some of the recent headwinds as being temporary and unlikely to trigger a fundamental shift in the short to medium term outlook for gold.”