Morning Highlights: Oil Rises as U.S.-China Trade Talks Continue, Saudi Supply to China Slips

Market Snapshot (as of 6:15 EST)

🔺 Brent (Aug): $67.34/b (+$0.30)

🔺 WTI (July): $65.54/b (+$0.25)

Brent on Monday touched $67.19 — its highest since April 28 — on trade deal hopes.

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Today’s Key Themes

• Optimism over U.S.-China trade talks lifts oil

• Saudi crude allocations to China dip by 1 million barrels in July

• OPEC+ hikes still not fully realized in physical volumes

• Iran expected to counter U.S. nuclear proposal

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Market Drivers

🔸 Trade Talks Fueling Optimism

Talks between U.S. and China enter Day 2 in London, with Trump calling them “very positive.”

➡ Traders are hopeful a deal could boost economic outlook and oil demand.

🔹 Onyx Capital’s Harry Tchilinguirian:

"There’s a sense of optimism. The market is waiting to see what this will produce."

🔸 Saudi Supply to China Down Slightly

Saudi Aramco will ship ~47 million barrels to China in July, down from 48 million in June, according to a Reuters tally.

“This could be a sign that OPEC+ unwinds aren’t adding as much supply as expected,” said Tchilinguirian.

🔸 OPEC+ Output: More Talk Than Action?

• Group scheduled to increase July output by 411,000 bpd

• But May data shows limited gains, with Iraq underproducing and KSA/UAE raising output only modestly

• This would be the 4th straight month of planned production hikes

🔹 ANZ’s Daniel Hynes:

"The prospect of further hikes in OPEC supply continues to hang over the market."

🔸 Iran Nuclear Standoff Continues

Tehran will submit a counter-proposal to the U.S., calling the current offer “unacceptable.”

• Key sticking point: U.S. wants a halt to uranium enrichment

• Any breakthrough could lead to sanctions relief and higher Iranian exports

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Additional Factors

• Canadian wildfires continue to threaten North American supply

• Goldman Sachs notes improving demand outlook with strong U.S. jobs data

• WTI above $65 could face resistance if OPEC+ hikes materialize fully