Oil prices rose early on Monday following a potential US-China trade deal framework, easing fears that tariffs and export curbs would dampen global demand. This optimism was balanced by fresh US and EU sanctions on Russia’s top oil producers, which maintained supply concerns.
Oil price recovery on trade deal hopes
Oil prices showed gains in early trading on Monday, October
27, 2025, after US and Chinese economic officials outlined a trade-deal
framework that eased concerns about tariffs and export restrictions between the
world’s two largest oil consumers, which had threatened global economic growth.
Brent crude futures increased by 46 cents, or 0.7%, reaching $66.40 per barrel,
while US West Texas Intermediate (WTI) crude also rose by 46 cents, or 0.75%,
to $61.96 per barrel. These increases followed strong gains in the previous
week, when prices rose by 8% (Brent) and 7% (WTI) respectively, partly due to
sanctions imposed by the US and EU on Russia.
US Treasury Secretary Scott Bessent revealed on Sunday that
senior officials from both countries developed “a very good framework” during
recent meetings in Kuala Lumpur, setting the stage for Presidents Donald Trump
and Xi Jinping to discuss trade collaboration later in the week. This framework
is expected to prevent full US tariffs on Chinese imports and delay China's
rare earth export controls, which had previously threatened commodity markets.
President Donald Trump expressed optimism on Sunday about
reaching an agreement with Beijing, indicating his outlook for positive
outcomes from upcoming meetings in both countries.
Supply concerns amid sanctions on Russian oil
Despite the improving sentiment from the trade deal, oil
prices continued to be supported by concerns over supply risks stemming from
new sanctions. The US recently sanctioned Russia’s two largest oil companies,
Rosneft and Lukoil, which together account for over 5% of global oil
production. The sanctions relate to pressure on Russia over its ongoing
conflict in Ukraine. Following these moves, oil prices surged more than 5% on
Thursday, October 23, 2025, and maintained weekly gains of around 7%, marking
their biggest rise since mid-June.
Russian President Vladimir Putin maintained a defiant stance
against these sanctions, underscoring ongoing geopolitical risks that
contribute to market uncertainty and help prevent oil prices from declining
significantly despite concerns about oversupply.
Balancing act between demand fears and supply risks
Analysts have noted that oil markets remain in a fragile
balance between fears of oversupply and hopes for steady or improved demand.
Earlier this month, prices experienced dips due to increased oil production
from OPEC+ and concerns about slowing demand linked to heightened US-China
trade tensions.
OPEC+ had agreed in early October to a modest increase in
total production by 137,000 barrels per day starting November, below previous
market forecasts, which provided some relief to oversupply worries. The group,
including Russia and other producers, has raised output by over 2.7 million
barrels per day in 2025, about 2.5% of global demand, contributing to market
pressure.
Demand uncertainty amid trade tensions
Trade tensions between the US and China have weighed heavily
on market sentiment, with the International Energy Agency warning of a
potential supply surplus of up to 4 million barrels per day in 2026, partly due
to tepid demand caused by tariffs and export restrictions. Recently announced
port charges and export controls between the two countries have further clouded
demand prospects.
However, the optimistic trade deal framework announced
recently has started to ease these concerns, providing relief to oil markets
after prolonged uncertainty. Market participants await further developments
from Presidents Trump and Xi Jinping’s meetings scheduled shortly.
US inventories and production trends
Investors are also closely monitoring US crude oil inventory
data to gauge demand strength. The American Petroleum Institute and the Energy
Information Administration have reported recent increases in US crude stocks
but noted declines in gasoline and distillates. US oil production is projected
to reach record levels for the year, adding another complex factor to
supply-demand dynamics.
Geopolitical disruptions and refinery issues in Russia
Geopolitical events continue to generate supply fears. Russia’s Kirishi oil refinery, one of its most efficient, suspended operations at a key distillation unit after a drone strike on October 4, with recovery expected in about a month. This disruption has added to supply concerns amid sanctions and ongoing conflict.
Analysts from Haitong Securities highlighted improved market sentiment, balanced between the new Russian sanctions that restrain supply and easing US-China tensions that support demand fundamentals. Mukesh Sahdev, CEO of energy consultancy XAnalysts, emphasised that despite a current negative sentiment driven by oversupply, geopolitical uncertainties related to production risks in Russia, Venezuela, Colombia, and the Middle East keep prices above $60 per barrel.
Additional regional oil developments
In parallel, Iraq is reported to be negotiating its OPEC
production quota based on available capacity of 5.5 million barrels per day and
is boosting oil exports despite recent oilfield fires. The country’s oil
minister, Hayan Abdel-Ghani, confirmed no impact on exports from these
incidents during an oil conference on October 27, 2025.
Meanwhile, India’s top refiner, Indian Oil Corp, reported a significant quarterly profit rise, driven by stronger refining margins amid declining international crude prices.