WTI crude oil futures bounced back to $62 per barrel on Wednesday, reversing earlier losses as optimism surrounding potential US-China trade talks provided a lift to market sentiment. The rebound came despite a backdrop of bearish supply-demand signals and a downbeat outlook from major energy agencies.
Oil rebounds as China opens door to trade talks
Investor confidence received a boost after Chinese officials signaled openness to reengaging in trade negotiations, albeit with clear conditions. Beijing emphasized the need for a more respectful tone from Washington and the appointment of a designated U.S. negotiator who has the explicit backing of President Trump—moves aimed at restoring credibility and consistency in trade discussions. The news reignited hopes that easing geopolitical tensions between the world’s two largest economies could help stabilize global trade flows and energy demand.
This glimmer of diplomatic progress helped oil prices shake off pressure from the latest International Energy Agency (IEA) report, which trimmed its global oil demand forecast for 2024. The agency cited sluggish economic growth, efficiency gains, and rising adoption of alternative energy sources as key reasons for the downgrade. It also warned that the oil market could face a prolonged surplus through 2026, raising concerns about sustained price weakness.
OPEC+ output has been climbing faster than anticipated
Compounding the bearish narrative, OPEC+ output has been climbing faster than anticipated, with several member countries ramping up production to capitalize on recent price spikes. Meanwhile, renewed momentum in U.S.-Iran nuclear negotiations has raised the prospect of more Iranian crude reentering the global market, adding further to supply-side risks.
Adding to the complex picture, U.S. crude stockpiles showed a surprising build last week. According to data from the American Petroleum Institute (API), U.S. crude inventories increased by 2.4 million barrels, defying analyst expectations for a 1.68 million barrel draw. The unexpected rise stoked concerns over weakening domestic demand or slower refinery activity.
Some supportive elements
However, there were some supportive elements within the report. Crude stocks at Cushing, Oklahoma—the delivery hub for WTI contracts—fell notably, and inventories of gasoline and distillates also posted declines. These drawdowns suggest that underlying fuel consumption remains relatively stable, cushioning the market from a steeper price drop.
As traders weigh improving geopolitical sentiment against rising supply and uncertain demand, oil markets remain caught in a tug-of-war. For now, the mere possibility of renewed US-China diplomacy has proved enough to support prices above key technical levels, but persistent headwinds suggest the path forward for crude may remain choppy.
