Market News

(Bloomberg) -- Oil pared some of the biggest weekly decline in two years after a ceasefire between Israel and Iran, with the market’s focus shifting from the conflict in the Middle East to US trade negotiations.

Brent edged higher near $68 a barrel, still down more than 11% for the week, while West Texas Intermediate traded above $65. With the fragile truce holding, investors are turning their attention to progress on US-China trade talks. Commerce Secretary Howard Lutnick said an understanding that was reached last month has been finalized, comments later echoed by China.

The deal, which Lutnick said was signed two days ago, includes language on China delivering rare earths to the US, he told Bloomberg in an interview. Officials from both countries have maintained close contact after holding trade talks in London earlier this month, a spokesperson for the Chinese Commerce Ministry said Friday.

Oil has swung in a range of about $15 a barrel this week after prices spiked on Monday following US bombing of Iranian nuclear sites, before President Donald Trump announced a ceasefire. The truce eased concerns about supply disruptions from a region that pumps about a third of the world’s crude.

Since the truce, Trump has given confusing messages about his maximum pressure campaign on Iranian petrodollars, even indicating that US financial penalties are doing little to stop China buying the Islamic Republic’s supplies. According to CNN, his administration is discussing incentives to restart talks with Tehran, including the possible easing of sanctions and freeing up restricted funds. Iran rejected the claim of a resumption of talks with the US, according to state-run IRNA.

The trade understanding with China flagged by Lutnick comes ahead of a July 9 deadline for the US to decide whether to impose the “Liberation Day” tariffs on its major trading partners. The commerce secretary added that the White House has imminent plans to reach agreements with 10 major trading partners.

The oil market will look to OPEC+ and the prospect for another big quota hike. The group meets on July 6 to decide on production policy for August.

“Oil prices have stabilized at the level seen before the escalation of the Middle East conflict,” Commerzbank analysts including Barbara Lambrecht said in a note. “However, a further expansion of oil supply threatens to become a litmus test.”

--With assistance from John Deane.