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Summary
- Potential accelerated OPEC+ output increases weighs on market
- Kazakhstan to prioritise national interest in oil output
- US-China trade war could halve China’s oil demand growth
(Reuters) – Oil prices recovered some losses on Thursday, with investors weighing a potential OPEC+ output increase against conflicting tariff signals from the White House and U.S.-Iran nuclear talks.
Brent crude futures were up 52 cents, or 0.79%, at $66.64 a barrel by 1034 GMT while U.S. West Texas Intermediate crude gained 59 cents, or 0.95%, to $62.86.
Prices had slid almost 2% in the previous session after Reuters reported that several OPEC+ members would suggest the group accelerate oil output increases for a second month in June, citing sources familiar with the OPEC+ talks.
Kazakhstan, which produces about 2% of global oil output and has repeatedly exceeded its quota over the past year, said it would prioritise national interest rather than that of OPEC+ in deciding production levels, Reuters reported on Wednesday.
“Such defiance envisages looser oil balance but, more importantly, it implies that Kazakhstan de facto ceases to exist as a member of OPEC+, although it remains in the alliance for now,” said PVM analyst Tamas Varga.
There have previously been disputes among OPEC+ members over compliance with production quotas, one of which resulted in Angola leaving the group in 2023.
“Further disagreement between OPEC+ members is a clear downside risk, as it could lead to a price war,” ING analysts said.
Signs that the U.S. and China could be moving closer to trade talks supported prices.
China called for U.S. tariffs to be cancelled on Thursday, a day after the Wall Street Journal reported that the White House would be willing to lower its tariffs on China to as low as 50% to open up negotiations.
U.S. Treasury Secretary Scott Bessent said on Wednesday that current import tariffs were not sustainable and would have to come down before trade talks could begin. White House Press Secretary Karoline Leavitt later told Fox News, however, that there would be no unilateral reduction in tariffs on goods from China.
Rystad Energy analysts say that a prolonged U.S.-China trade war could cut China’s oil demand growth in half this year to 90,000 barrels per day (bpd) from 180,000 bpd.
Potentially applying downward pressure on oil prices, the U.S. and Iran will hold a third round of talks this weekend on a possible deal to reimpose restraints on Tehran’s uranium enrichment programme. The market is watching for any sign that a U.S.-Iran rapprochement could lead to an easing of sanctions on Iranian oil.
However, the U.S. placed fresh sanctions on Iran’s energy sector on Tuesday, which Iran’s foreign ministry said showed a “lack of goodwill and seriousness” over dialogue with Tehran.
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