Oil prices rise in anticipation of trade talks between the US and China
7 May 09:08
Oil prices showed a moderate increase on Wednesday and remain slightly above the four-year lows recorded recently. The main factors behind this were trade talks between the US and China and signs of a decline in US oil production, Komersant ukrainskyi reports citing Reuters.
According to OilPrice, Brent crude oil futures rose 57 cents, or 0.92%, to $62.72 per barrel as of 08:13 Kyiv time. At the same time, prices for US West Texas Intermediate (WTI) rose by 63 cents, or 1.05%, to $59.71 per barrel.
Both benchmark crude oils recently fell to a four-year low following OPEC’s decision to accelerate production increases, raising fears of oversupply at a time when U.S. tariffs have heightened concerns about demand.
“The news that the US and China will begin trade talks this weekend sent Brent crude prices higher, extending the relief rally in the oil market. However, while the talks will help improve sentiment, we need to see significant progress on tariff reductions to improve the demand outlook,”
– said commodity strategists at ING on Wednesday.
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The situation in the US is working for growth
Meanwhile, lower oil prices in recent weeks have prompted some U.S. energy companies, including Diamondback Energy and Coterra Energy, to announce rig cuts, which analysts believe will eventually support prices by reducing production.
The latest announcements suggest that production will weaken in the coming months, said Daniel Hines, senior commodities strategist at ANZ Bank:
“Last month, we warned that falling prices and declining drilling activity were raising the risk of a drop in US oil production.”
According to the American Petroleum Institute (API), the country’s crude oil inventories fell by 4.5 million barrels in the week ended May 2, market sources said on Tuesday.
The US government data on reserves is expected soon. Experts surveyed by Reuters predict a decline in US crude oil stocks by 800,000 barrels over the past week, according to these data.
Such a discrepancy between API data and official data forecasts is quite common in the oil market, as they use different methodologies for collecting and analyzing information.
Expectations of market participants
Prices also received support from signs of improving demand. Consumers in China increased spending during the May Day holiday, and market participants returned after a five-day weekend.
In Europe, companies are expected to report a 0.4% rise in first-quarter profits, an improvement from the 1.7% drop that analysts had forecast a week ago.
The Federal Reserve is widely expected to leave U.S. interest rates unchanged on Wednesday, as tariffs are causing instability in the economic outlook.
Energy market experts note that the situation remains unstable, and the further dynamics of oil prices will depend on the outcome of the US-China negotiations, as well as on OPEC’s decisions to regulate production levels in the coming months.
