Oil Prices Surge on Trade Optimism

Crude oil prices climbed more than 2% on Wednesday, driven by renewed optimism surrounding U.S.-China trade relations and supportive U.S. inventory data. A weaker U.S. dollar and bullish supply reports also played a role, helping crude rebound after recent market turbulence.

Investors welcomed reports that China may be open to trade negotiations—contingent upon the U.S. softening critical remarks from key officials. These signals fueled hopes for a de-escalation in trade tensions, lifting both Brent crude and West Texas Intermediate (WTI) by over 2% during afternoon trading.

Crude also gained momentum following the U.S. Energy Information Administration’s (EIA) latest report, which showed a build of 500,000 barrels in domestic stockpiles. Although a modest increase, it reassured markets shaken by prior volatility. Additionally, the EIA projected U.S. oil production would peak at 14 million barrels per day by 2027, remaining steady until the early 2030s before declining through 2050.

Despite the bullish catalysts, macroeconomic headwinds remain. The World Trade Organization slashed its 2025 global trade growth forecast from +3.0% to -0.2%, citing escalating tariff threats. If the U.S. enforces further reciprocal duties, global commerce could contract by as much as 1.5%, potentially dampening future energy demand.

Adding to supply concerns, the U.S. imposed fresh sanctions on Iran, targeting a China-based independent refinery and several shipping entities linked to Iranian crude exports. These sanctions, part of Washington’s “maximum pressure” campaign, aim to reduce Tehran’s oil revenue, which U.S. officials claim supports terrorist proxies and destabilizing activities.

Meanwhile, speculation surrounds BP as a potential acquisition target. The British energy firm is undergoing a strategic pivot—cutting back on renewables and focusing on core oil and gas operations—to regain investor confidence. Analysts suggest major players like Shell, ExxonMobil, and Chevron may consider a bid, amid a broader trend of consolidation in the energy sector.

While oil prices found strength this week on trade optimism and sanctions-driven supply tightening, broader global economic uncertainty and trade tensions continue to cast a shadow over the market’s outlook. As negotiations evolve and geopolitical dynamics unfold, energy markets are likely to remain volatile in the weeks ahead.