Oil prices showed a downward trend on Wednesday as markets awaited the outcome of U.S.-China trade negotiations. The weak demand for oil from China, coupled with increased production from OPEC+, has put additional pressure on prices. Brent crude futures fell by 15 cents, or 0.2%, settling at $66.72 a barrel, while U.S. West Texas Intermediate crude dropped 10 cents, also a 0.2% decline, to $64.88 by 0644 GMT.
During two days of intense discussions in London, U.S. and Chinese officials established a framework aimed at reviving their trade truce. This includes addressing China’s export restrictions on rare earth minerals and magnets. U.S. Commerce Secretary Howard Lutnick emphasized that the agreement would be presented to President Trump for his approval.
Market analyst Priyanka Sachdeva noted that price corrections are a blend of technical profit-taking and cautious sentiment leading up to the official announcement. Tony Sycamore from IG remarked that resolving trade tensions could diminish risks to the Chinese economy and stabilize the U.S. economy, which would be beneficial for crude oil demand and pricing. On the supply front, OPEC+ plans to increase oil production by 411,000 barrels per day in July, aiming to unwind previous cuts for the fourth consecutive month.
However, some analysts doubt that regional demand will absorb this extra supply. Capital Economics’ economist Hamad Hussain indicated that while demand from OPEC+ nations like Saudi Arabia might help support prices, any increase would likely be seasonal, forecasting Brent crude prices could drop to $60 per barrel by year-end. Later on Wednesday, traders will turn their attention to the weekly U.S. oil inventories report from the Energy Information Administration.
Recent data suggested a decline of 370,000 barrels in U.S. crude oil stocks last week. Analysts expect the upcoming EIA report to confirm a larger drop of 2 million barrels for the week ending June 6, while distillate and gasoline inventories are anticipated to rise.