Morning Highlights: Oil Set for Weekly Gain Despite Persistent Supply Pressure

Market Snapshot (as of 06:20 EST)

🔺 Brent: $64.62/b (+$0.09)

🔻 WTI: $59.80/b (−$0.09)

📈 Brent and WTI up ~1% and 0.5% this week

📉 Both fell >2% Thursday on Iran deal fears

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📉 Today’s Market Themes:

• Oil gains on U.S.-China trade optimism

• Prices pressured by OPEC+ output hikes and Iran deal prospects

• IEA forecasts higher supply growth and emerging surplus

• Canadian oil flows shift from U.S. to China via Trans Mountain pipeline

• Traders eye Fed policy for demand signals

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📰 Key Drivers:

🔸 U.S.-China Trade Thaw Supports Sentiment

Brent and WTI are on track for a second straight weekly gain after the U.S. and China agreed to pause their trade war for 90 days, cutting tariffs on each other’s goods and opening the door to renewed negotiations.

Vanda Insights' Vandana Hari: “If talks progress and duties are rolled back further, crude could add $2–$3 more per barrel.”

🔸 Iran Deal Still in Play

President Trump said the U.S. is “nearing a nuclear deal” with Iran, which could bring an additional 400,000 bpd of Iranian oil back to market.

“The feel-good effect of the U.S.-China trade détente fades quickly when the Iran supply risk resurfaces,” said Onyx Capital's Harry Tchilinguirian.

Analysts warn that even a partial deal lifting sanctions would weigh heavily on crude prices, particularly if OPEC+ continues raising output.

🔸 OPEC+ Adds Supply Despite Demand Uncertainty

OPEC+ is accelerating its supply hikes, with a second monthly quota boost in June set to unwind more of the 2.2 million bpd of voluntary cuts from 2023.

• IEA raised 2025 global supply growth forecast by +380,000 bpd

• Full-year surplus expected to average 720,000 bpd

• Brent has dropped from $83 in January to ~$64 this week

🔸 IEA Cautions on Demand Outlook

The IEA trimmed demand growth expectations for H2 2025 to 650,000 bpd, citing:

• Rising EV adoption

• Weak industrial activity

• Trade-related economic drag

Still, full-year 2025 demand growth was nudged up to 740,000 bpd, with 2026 forecast at 760,000 bpd.

🔸 Inventory Data Remains Bearish

EIA data this week showed a 3.5 million barrel build in U.S. crude inventories—well above expectations. SPR inventories also rose by 500,000 barrels.

UBS: “Product draws were positive, but crude builds signal lingering oversupply fears.”

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📊 Global Flows: Canada’s Crude Reaches New Shores

🔹 China Surpasses U.S. as Top Buyer of TMX Oil

• China took ~207,000 bpd from Canada via the Trans Mountain Expansion (TMX) since full ramp-up in June 2024

• U.S. imports from TMX: ~173,000 bpd

• Canadian crude exports to non-U.S. markets surged 60% in 2024

📈 Other buyers of TMX oil:

• South Korea, Japan, India, Brunei, Taiwan

• TMX ran at 77% capacity in 2024, expected to hit 84% in 2025 and 92% by 2027

• New expansions could add 200–300k bpd to TMX capacity

Turner, Mason & Co.'s Skip York: “Virtually all of those incremental vessels will flow west — to Asia.”