Oil Prices Rebound Amid Trade Optimism

Oil prices rebounded on Wednesday, holding just above four-year lows as markets reacted to fresh hopes for U.S.-China trade talks and signs of slowing U.S. production. Brent crude climbed to $62.59 per barrel, while West Texas Intermediate (WTI) rose to $59.59, extending a modest relief rally following sharp losses triggered by OPEC+’s accelerated output increases.

The announcement of upcoming trade negotiations between the U.S. and China helped ease demand concerns, providing temporary support to crude prices. Analysts at ING cautioned, however, that while such talks may lift sentiment, real improvements would require tangible progress on tariffs to meaningfully boost the demand outlook.

In response to falling prices, several U.S. energy firms, including Diamondback Energy and Coterra Energy, have announced rig reductions. This, along with a reported 4.5 million-barrel drop in U.S. crude inventories, suggests that production may slow in the coming months, potentially tightening supply and supporting prices.

Global demand indicators also offered support. Chinese consumer spending rose during the May Day holiday, and European corporate earnings outpaced expectations. Additionally, geopolitical tensions from the Russia-Ukraine war and unrest in the Middle East continue to underpin oil markets, reinforcing supply-side risks.

The U.S. dollar regained some strength ahead of the Federal Reserve’s policy decision, which could limit oil gains as a stronger dollar makes crude more expensive for international buyers. At the same time, the current price range—below $65 per barrel—leaves little incentive for U.S. producers to drill new wells, potentially slowing output growth into 2025.

Despite the downturn, most oil majors such as ExxonMobil, Chevron, and Shell have kept their capital expenditure plans unchanged, anticipating a longer-term recovery. BP has been the exception, trimming its budget and warning of possible further reductions if market conditions remain weak.

While oil prices have staged a recovery, markets remain fragile. Hopes for a trade breakthrough, slowing U.S. output, and firm geopolitical tensions are supporting prices for now, but oversupply fears and weak economic outlooks continue to weigh on sentiment. Without stronger demand signals or policy clarity, volatility is likely to persist in the weeks ahead.