Oil prices softened on Wednesday as markets evaluated the outcome of U.S.-China trade talks, which are yet to be reviewed by President Donald Trump. Weak oil demand from China and OPEC+ production increases are weighing on the market.
Brent crude futures declined by 19 cents, or 0.3 percent, to trade at $66.680 a barrel (currently trading above $66.75), while U.S. West Texas Intermediate crude fell by 16 cents, or 0.3 percent, to $64.82 at 03:18 GMT (currently trading above $64.95).
U.S. and Chinese officials agreed on a framework to put their trade truce back on track and resolve China’s export restrictions on rare earth minerals and magnets, U.S. Commerce Secretary Howard Lutnick said on Tuesday at the conclusion of two days of intense negotiations in London. “The current (price) corrections can be attributed to a mix of technical profit-taking and caution leading up to the US-China (official) announcement,” Reuters reported, quoting Phillip Nova, senior market analyst Priyanka Sachdeva.
Trump will be briefed on the outcome before giving his approval, Lutnick added. “In terms of what it means for crude oil, I think it removes some downside risks, particularly to the Chinese economy and steadies the ship for the U.S. economy—both of which should be supportive for crude oil demand and the price,” said Tony Sycamore, a market analyst for IG.
Read more: Crude oil prices climb above $67.2 as U.S.-China trade talks show promise
OPEC+ to boost oil output by 411,000 barrels in July
Meanwhile, on the supply side, OPEC+ plans to increase oil production by 411,000 barrels per day for July as it looks to unwind production cuts for a fourth consecutive month, with some analysts not expecting regional demand to absorb these excess barrels. “Greater oil demand within OPEC+ economies—most notably Saudi Arabia—could offset additional supply from the group over the coming months and support oil prices,” said Capital Economics’ climate and commodities economist Hamad Hussain in a note. “However, given that any boost to demand will be seasonal, we still think that Brent crude prices will fall to $60 per barrel by the end of this year.”
Later on Wednesday, markets will focus on the weekly U.S. oil inventories report from the Energy Information Administration, the statistical arm of the U.S. Department of Energy. Crude stocks fell by 370,000 barrels last week, according to market sources who cited American Petroleum Institute figures on Tuesday. Analysts polled by Reuters on Monday expected that U.S. crude oil stockpiles fell by 2 million barrels in the week to June 6, while distillate and gasoline inventories likely rose.
