Background on Key Figures and Relevance
The oil market has been closely watching the recent trade truce between the United States and China, as both nations agreed to significant tariff reductions for at least 90 days. This development has led to a rise in oil prices, with gains being capped by increased supply and uncertainty over whether this trade pause will pave the way for a more lasting agreement.
Oil Price Movements
Oil prices were on the rise on Tuesday, with gains being restricted by rising supply and hesitation regarding the trade truce’s potential for a long-term accord between the US and China. Brent crude futures climbed 50 cents, or roughly 0.8%, to $65.46 per barrel by 4:54 a.m. CDMX time. West Texas Intermediate (WTI) crude oil in the US also increased by 53 cents, or about 0.9%, to $62.49 per barrel.
Both benchmarks had surged around 4% or more in the previous session following the US-China agreement on tariff cuts. This development also boosted Wall Street stocks and the US dollar.
Market Evaluation of Trade Truce
According to PVM analyst Tamas Varga, the market is now assessing the impact of the trade truce. Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) has increased oil production more than anticipated since April, and May production is expected to rise by 411,000 barrels per day.
Saudi Arabia’s Oil Supply to China
Furthermore, Reuters sources indicate that Saudi Arabia’s crude oil supply to China will remain stable in June, following a significant increase last month after OPEC+ decided to boost production. Saudi Arabia is China’s second-largest crude oil supplier, trailing only Russia.
Refined Product Demand
Despite concerns over weakening crude demand outlook, JPMorgan analysts note positive signals from refined product markets. Although international crude prices have dropped by 22% since their peak on January 15, refined product prices and refining margins have remained stable.
Reduced refinery capacity, primarily in the US and Europe, has strained gasoline and diesel balances, increasing reliance on imports and making markets more vulnerable to price hikes during maintenance and unforeseen disruptions.
Key Questions and Answers
- Q: What is the current state of oil prices? A: Oil prices are rising, with gains being capped by increased supply and uncertainty over the US-China trade truce’s potential for a long-term agreement.
- Q: How has the US-China trade truce affected oil prices? A: The agreement on tariff reductions for at least 90 days has led to a rise in oil prices, with both Brent and WTI crude benchmarks increasing in value.
- Q: What is the expected production increase by OPEC? A: OPEC is expected to raise oil production by 411,000 barrels per day in May.
- Q: How will Saudi Arabia’s oil supply to China be affected? A: Saudi Arabia’s crude oil supply to China is expected to remain stable in June, following a significant increase last month.
- Q: What are the implications of reduced refinery capacity? A: Reduced refinery capacity, mainly in the US and Europe, has strained gasoline and diesel balances, increasing reliance on imports and making markets more vulnerable to price hikes during maintenance and unforeseen disruptions.
