LONDON, UK: Crude prices surged this week as investors welcomed fresh signs of progress in U.S.-China relations, lifting hopes of reduced trade tensions between the world's top two economies and biggest oil consumers.

Brent crude futures climbed US$1.15, or 1.7 percent, to $68.02 a barrel by 1249 GMT. U.S. West Texas Intermediate (WTI) rose $1.31, or 2 percent, to $66.29, reaching its highest level in more than two months.

The gains came after U.S. President Donald Trump announced that Washington and Beijing had reached a trade deal, though the final sign-off was still pending from both leaders. As part of the agreement, China would provide magnets and rare earth minerals, and the U.S. would continue to allow Chinese students to attend American colleges.

Although the broader economic impact remains uncertain, analysts say the news temporarily removes a significant source of downside risk for oil prices.

"The trade-related downside risk in oil has been temporarily removed, although the market reaction has been tepid as it is not clear how economic growth and global oil demand will be affected," said Tamas Varga, an analyst at PVM Oil Associates.

Geopolitical tensions also remain in focus. Trump expressed skepticism that Iran would halt uranium enrichment in exchange for a nuclear deal with the U.S., as per an interview released Wednesday. In response, Iran warned it could target American bases in the Middle East if talks collapse and conflict erupts — a reminder of the persistent risk premium in oil markets.

Despite the tension, the Iranian oil supply is expected to remain under pressure due to ongoing U.S. sanctions.

At the same time, oil output from OPEC+ is rising. The group plans to raise production by 411,000 barrels per day in July, marking the fourth consecutive month of supply increases as it continues to unwind earlier cuts.

Still, that extra supply may be absorbed internally. "Greater oil demand within OPEC+ economies – most notably Saudi Arabia – could offset additional supply from the group over the coming months and support oil prices," said Hamad Hussain of Capital Economics.

In the U.S., macroeconomic data also added momentum to oil prices. Consumer price growth came in lower than expected for May, fueling speculation that the Federal Reserve could begin cutting interest rates by September. Lower borrowing costs typically support economic growth — and, with it, energy demand.

Traders are also awaiting the latest U.S. stockpile data. The American Petroleum Institute reported this week that U.S. crude inventories fell by 370,000 barrels last week.