Oil closes at two-week highs on tariff cuts

Oil prices rose about 1.5% on Monday to two-week highs after the United States and China agreed to temporarily reduce tariffs, raising hopes for an end to the trade war between the world's two largest economies.

Brent crude futures gained $1.05, or 1.64%, to $64.96 a barrel. U.S. West Texas Intermediate (WTI) crude futures advanced 93 cents, or 1.52%, to $61.95. Both contracts hit their highest levels since April 28.

The United States and China halted tariffs, sending Wall Street stocks, the dollar, and crude oil prices soaring on hopes that the world's two largest oil consumers could end a trade war that has fueled fears of a recession.

"This was a larger-than-expected de-escalation and represents an improvement in the outlook, although the negotiation process is likely to remain complex," analysts at ING bank said in a note.

Federal Reserve Governor Adriana Kugler said the trade deal could make it less necessary for the Fed to cut interest rates to stimulate the economy. This pressured oil prices in early trading, as lower rates can boost demand for crude.

In April, oil prices fell to a four-year low amid concerns about the trade war between the United States and China, which could depress economic growth and demand for crude oil. Furthermore, the Organization of the Petroleum Exporting Countries (OPEC) decided to increase production more than expected.

In Saudi Arabia, OPEC's largest producer, oil giant Aramco said it expects oil demand to remain resilient this year and sees further upside potential if Washington and Beijing resolve their trade dispute.

Oil prices were supported after Norwegian energy company Equinor announced the temporary suspension of production from the Johan Castberg field in the Barents Sea for repairs.

In the Black Sea, exports of the Black Sea CPC blend through the Caspian Pipeline Consortium system were on track to decline to 1.5 million bpd in May, down from 1.6 million bpd in April.

In Mexico, PMI, the trading arm of state-owned energy company Pemex, forecasts a reduction in crude oil exports this year, as more will be sent to local refineries, especially the new Dos Bocas refinery.

Ongoing talks between the United States and Iran over Tehran's nuclear program could put pressure on crude oil prices, as Iran is OPEC's third-largest producer, and any nuclear deal could ease sanctions on Iranian exports.

Russian crude oil supplies could also increase on global markets if US-brokered talks lead to peace between Russia and Ukraine.