Morning Highlights: Oil Steady as Investors Eye U.S.-China Trade Talks in London

Market Snapshot (as of 6:10 EST)

🔹 Brent: $66.71/b (+$0.24)

🔹 WTI: $64.80/b (+$0.22)

📈 Weekly Performance (Last Week)

🟢 Brent: +4%

🟢 WTI: +6.2%

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Today’s Themes

• U.S.-China trade talks dominate sentiment

• Chinese data disappoints but optimism holds

• OPEC+ output increase still not fully materialized

• Risk of market surplus later in 2025 remains

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Key Market Drivers

🔸 Trade Talks Underway

Trump and Xi Jinping spoke last Thursday ahead of a U.S.-China trade meeting in London today. The renewed dialogue has buoyed risk sentiment, helping oil prices hold steady near recent highs.

“A trade deal could support the global outlook and boost commodity demand,” analysts say.

🔸 Chinese Macro Weakness

China's exports slowed to a 3-month low in May, while PPI deflation hit a two-year low, reflecting rising domestic and international pressures.

Also, crude imports fell to a 4-month daily low due to refinery maintenance.

This data put WTI’s attempt to break above $65 “at risk,” according to IG’s Tony Sycamore.

🔸 OPEC+ Output Still Lagging Behind Pledges

Despite plans to raise quotas by 1 million bpd between March and June, actual production is barely moving, says Morgan Stanley.

Their research shows:

• No clear uptick in Saudi output

• No large increase in refinery runs or exports

• Real additions now expected between June–September (~420,000 bpd)

🔸 Surplus Looms Later in Year

Morgan Stanley forecasts:

• Global demand growth: ~800,000 bpd

• Non-OPEC+ supply growth: ~1.1 million bpd

• Combined with OPEC+ return, a market surplus is likely in Q3/Q4

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In Summary

• Upside Drivers:

Hopes of U.S.-China trade thaw

Geopolitical risks (Middle East, Venezuela sanctions)

Summer demand season

• Downside Risks:

Weak China macro data

OPEC+ production ramp

Slowing global demand growth projections