Oil drops after US, China reach trade agreement

Oil prices fell on Monday as investors questioned whether the newly proposed trade framework between the United States and China would immediately boost demand, while remarks from Iraq’s oil minister confirming that a fire at one of the country’s oil fields had not affected exports also weighed on sentiment.

Brent crude futures declined by 32 cents, or about 0.5%, to $65.62 a barrel by 10:15 GMT. US West Texas Intermediate (WTI) crude slipped 30 cents, or roughly 0.5%, to $61.20 per barrel.

US Treasury Secretary Scott Bessent said Sunday that US and Chinese officials had reached a “substantial framework” for a trade deal that could avert 100% tariffs on Chinese goods and delay Beijing’s restrictions on rare earth exports. The two sides are set to continue trade talks later this week.

The announcement lifted global equities on Monday, while traditional safe havens such as gold, bonds — and oil — retreated.

Demand concerns weigh on oil markets

“Oil traders are more skeptical about trade agreements than their counterparts in the equity market,” said John Evans, analyst at PVM Oil Associates. “Positive headlines around negotiations don’t necessarily translate into an immediate boost in demand.”

Concerns about weak global demand have weighed on oil prices in recent weeks, with Brent earlier this month touching its lowest level since May. However, US sanctions on Russia and stronger-than-expected American consumption have provided partial support.

Chris Beauchamp, chief market analyst at IG Bank, noted: “Optimists in the market are hoping that US oil consumption continues to recover — otherwise, the modest pullback we’re seeing today could deepen in the coming days.”

Iraq negotiating its OPEC production quota

Meanwhile, Iraqi Oil Minister Hayan Abdul-Ghani said Monday that Iraq — the largest OPEC member exceeding its production quota — is negotiating its share within its total output capacity of 5.5 million barrels per day.

OPEC and its allies shifted strategy earlier this year by rolling back previous output cuts in an effort to reclaim market share, a move that has partly curbed further price gains.

The Iraqi minister also confirmed that Sunday’s fire at the Zubair oil field had not affected the country’s crude exports.

Impact of sanctions on Russian oil

Last week, Brent crude jumped 8.9% and WTI gained 7.7%, both supported by fresh US and European sanctions targeting Russian energy companies.

“Persistent challenges remain for Russian oil flows,” said Yaniv Shah, analyst at Rystad Energy. “Much depends on how strictly the sanctions are implemented and monitored.”