Morning Highlights: Oil Prices Steady as Trump-Xi Call Boosts Market, Supply Risks Loom

Market Snapshot (as of 6:45 EST)

🔹 Brent: $65.42/b (+$0.08)

🔹 WTI: $63.40/b (+$0.03)

On track for first weekly gain in three weeks.

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Today’s Themes

• Trade optimism returns after Trump-Xi phone call

• Light sweet crude under pressure amid global supply wave

• Saudi Arabia cuts July OSPs less than expected

• OPEC+ output rising faster than demand

• U.S. export competitiveness slipping

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Key Market Drivers

🔸 Trump-Xi Trade Talks Resume

China’s Xinhua confirmed the U.S. initiated the latest contact. Trump called it a “very positive” conversation, boosting hopes for tariff de-escalation and demand recovery.

🔸 Venezuela & Iran Supply Watch

BMI warns of U.S. sanctions on Venezuela and potential Israeli strike on Iran, raising geopolitical risk premiums. Iran’s crude flows to China dipped in May amid tighter sanctions and refinery maintenance.

🔸 Saudi Price Strategy

Saudi Aramco cut its July official selling prices to Asia to near two-month lows. While expected, the reduction was smaller than feared, signaling a cautious strategy as OPEC+ brings barrels back.

🔸 U.S. Crude Exports Struggle

Exports dropped to 3.8 million bpd in May (from 4 million in April). Light sweet grades like WTI-Midland and LLS saw significant price erosion:

• WTI-Midland premium: off 45% since March

• LLS: down ~30% in same period

🔸 Heavy/Medium Grades in Favor

Global refiners favor heavier barrels amid rising demand for distillate-rich outputs. WTI faces pressure from:

• CPC Blend from Kazakhstan

• Guyana, Brazil, Libya, Algeria, Johan Castberg

• Reduced demand in Europe & Asia for light grades

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Market Balance Outlook

• OPEC+ has restored 1.37 million bpd of cuts since April

• HSBC: Market appears balanced in Q2/Q3, Q4 surplus likely

• EIA:

o 2025 demand growth: +970k bpd

o 2025 supply growth: +840k bpd