Commodity prices diverged sharply on Monday, as the prospect of a U.S.-China trade deal had direct implications on both gold and energy markets.
U.S.-China Trade Deal in the Works
The Wall Street Journal reported Sunday that U.S. and Chinese officials are in the final stages of completing a trade deal that would lower tariffs and other restrictions on American-made goods. Washington is also considering removing all of its tariffs against Chinese products.
Beijing has also pledged to open foreign access to domestic markets through a series of steps that would level the playing field for American businesses. This includes expediting the timetable for removing foreign-ownership limitations on the auto industry and lowering tariffs on imported vehicles.
The breakthrough comes on the heels of intense dialogue between the U.S. and Chinese in February, which prompted President Trump to delay a tariff hike on Chinese goods. Negotiations took place in Beijing and Washington over a two-week period.
The prospect of a U.S.-China trade agreement sent crude prices surging on Monday. China is the world’s largest energy consumer and the resumption of free trade with the United States bodes well for its economy.
West Texas Intermediate (WTI) futures climbed 99 cents, or 1.8%, to $56.79 a barrel on the New York Mercantile Exchange. The contract reached a high of $57.00 earlier in the day. International Brent futures rose $1.01, or 1.6%, to $66.08 a barrel on London’s ICE futures exchange.
Crude markets have been in recovery mode since the beginning of the year thanks to renewed commitments by Saudi Arabia and its allies to curb production. The Saudis are eyeing bigger output cuts this month in an effort to re-balance an oversupplied market.