Oil prices rebounded on Thursday, partially recovering from losses earlier in the week, as hopes of U.S.-China trade talks and concerns over OPEC+ output cuts created a volatile yet optimistic market environment.
By 9:30 AM EDT, West Texas Intermediate (WTI) Crude was up 0.95%, trading at $62.86 per barrel, while Brent Crude rose 0.7%, reaching $66.58. This recovery followed mixed signals from Washington and Beijing, suggesting potential de-escalation in the ongoing U.S.-China tariff dispute.
U.S.-China Trade Talks Fuel Optimism
In a key development, President Donald Trump stated on Wednesday that tariffs on China could be reduced substantially. This comment followed China’s call for the U.S. to cancel its tariffs, though Chinese officials clarified that no direct trade talks had yet occurred. Market sentiment reacted positively to these remarks, as a trade war resolution would likely boost global demand for oil, particularly from China.
However, this optimistic outlook was tempered by rising concerns over OPEC+ production. Some members of the group, including Kazakhstan, have defied agreed-upon output quotas, signaling potential instability within the alliance. Analysts warn that such defiance could lead to a price war within OPEC+, adding volatility to the oil market.
Kazakhstan’s Defiance and OPEC+ Uncertainty
Kazakhstan, which contributes approximately 2% of global oil production, declared it would prioritize its national interests over OPEC+ decisions, raising alarms about looser oil balances. This followed earlier reports of several OPEC+ members suggesting an accelerated output increase for June. The growing tension between members could destabilize the group and dampen oil prices in the longer term.
Geopolitical Factors and U.S.-Iran Talks
In addition to the U.S.-China trade developments, the market also closely watches U.S.-Iran nuclear talks. Despite new sanctions imposed on Iran by the U.S., analysts are still looking for signs of a possible deal that could ease sanctions on Iranian oil. This would flood the market with additional supply, potentially lowering oil prices further.
Ongoing Supply Risks and Price Recovery
Despite these geopolitical tensions, strong U.S. oil draws reported by the Energy Information Administration (EIA) have provided support for oil prices. Analysts predict that a prolonged trade war between the U.S. and China could significantly reduce China’s oil demand growth, potentially cutting it in half. However, the current signs of diplomacy and tariff reductions are helping to restore some confidence in the market.
As global markets digest mixed signals from both trade discussions and OPEC+ dynamics, oil prices remain volatile. While optimism surrounding the U.S.-China trade situation is providing a short-term lift, long-term uncertainty remains due to OPEC+ disagreements and geopolitical tensions. Investors will be closely monitoring these developments in the coming weeks to gauge the direction of the oil market.