Early in the week, trade discussions between the US and China resulted in a mutual 90-day suspension of the recently-imposed huge bi-lateral tariff increases. Global markets reacted favorably  but remain wary until a definitive deal is worked out. Late week talks of progress being made in the on-again/off-again US/Iran nuclear talks reignited the prospect of increasing output there should the US lift the current sanctions. However, the US Treasury Department just imposed tighter sanctions on the sales of Iranian crude.

The International Energy Agency (IEA), for the first time in several months, increased projections for oil growth of 740,000 b/d this year from 726,000 b/d citing lower oil prices and a potentially less severe impact of US tariffs. However, IEA also is forecasting global oil supply to rise by 1.6 million b/d this year and by 970,000 b/d in 2026. While the agency foresees the increases coming from China, Brazil, and Canada, US shale is expected to decline next year due to lower prices. OPEC, meanwhile, is holding steady its demand growth forecast to +1.3 million b/d.

China did increase oil imports over the last 2 months, sending a possible demand increase signal to the market. However, the majority of the purchases were for inventory purposes as prices dipped and concerns regarding sanctions on Russian and Iranian crude led to supply worries. And it turns out, OPEC+’s actual output increase for April was a mere 25,000 b/d, far below the announced increase of over 110,000 b/d. 

The Energy Information Administration’s (EIA) Weekly Petroleum Status Report indicated that commercial crude oil inventories last week increased while refined product levels decreased. The SPR gained 600,000 bbl to 399.7 million bbl. Total US oil production held at 13.4 million b/d vs. 13.1 last year at this time.

Inflation cooled last month to 2.3% on an annual basis and was in line with expectations as  well as the lowest reading since 2021, which also helped spark the stock market rally. The number of applications for unemployment benefits was unchanged last week at 229,000. All three major US stock indexes have moved higher week-on-week mainly on the tariff pause. The USD is also higher, which could cap any gains made in crude prices.

Oil, technical analysis