Brent and WTI drew modest support after Trump extended a July 9 deadline for EU trade talks, scrapping a proposed 50% tariff hike that had rattled financial markets late last week. European shares rebounded, and the euro rose, while gold dipped as risk sentiment improved. UBS analysts noted that Trump’s softer stance and warnings of further sanctions on Russia added modest bullish tone to oil prices, though U.S. Memorial Day trading volumes were thin.
OPEC+ Poised to Add Barrels, Challenging the Oil Prices Forecast
Traders remain cautious ahead of this weekend’s OPEC+ meeting, where the group is expected to advance its plan to unwind voluntary production cuts. Sources indicate a potential increase of 411,000 barrels per day (bpd) in July, following prior additions of roughly 1 million bpd between April and June. While not yet formalized, the tone from core members, especially Saudi Arabia, reflects a growing emphasis on regaining market share, even at the expense of price stability.
This supply-side pressure could exacerbate an already saturated market. Analysts warn that unless demand rebounds meaningfully, the added barrels will deepen the imbalance, dragging prices lower.
U.S. Inventory Build and Chinese Surpluses Undercut Demand Recovery
Data from the U.S. Energy Information Administration showed a surprise 1.3 million barrel crude inventory build last week, despite stronger exports. Imports surged and product demand—particularly for gasoline and distillates—remained weak. Inventories now stand at 443.2 million barrels, marking a multi-week high and underscoring concerns over domestic consumption.
Meanwhile, China’s April figures pointed to slowing industrial output and retail sales. Refinery throughput declined, yet imports remained strong, leading to a crude surplus of 1.89 million bpd—its largest since mid-2023. Chinese refiners continue to stockpile discounted barrels from Russia and Iran, limiting their appetite for additional seaborne supplies and pressuring global benchmarks.
Geopolitics Offer Limited Upside as Fundamentals Dominate
While geopolitical tension persists—including threats of new U.S. sanctions on Russia and lingering concerns over Iranian supply disruptions—these risks have offered only temporary support. Traders are largely discounting political noise in favor of clear supply-demand signals. Friday’s Baker Hughes rig count showing a decline to 465—the lowest since November 2021—may imply future output constraints, but it hasn’t yet swayed near-term sentiment.
