…Middle East tensions, OPEC+ output hike fail to dampen rally
Oil prices surged to a seven-week high on Wednesday after the U.S. announced a breakthrough in trade talks with China, raising hopes of improved global economic stability and fuel demand.
Brent crude futures jumped $1.15, or 1.7%, to $68.02 per barrel by 1249 GMT. U.S. West Texas Intermediate (WTI) crude climbed $1.31, or 2%, reaching $66.29—its highest since early April. The rally followed U.S. President Donald Trump’s remarks that a preliminary trade deal had been agreed with China, potentially de-escalating years of tariff disputes.
Under the deal, Beijing will resume shipments of rare earth minerals and magnets, while Washington will ease restrictions on Chinese student visas. Trump emphasised that the agreement still requires final sign-off from himself and Chinese President Xi Jinping. Market sentiment improved on the news, lifting crude futures despite lingering uncertainty around its long-term economic impact.
“The trade-related downside risk in oil has been temporarily removed,” said Tamas Varga, analyst at PVM Oil. “Still, the market reaction remains cautious due to unclear global growth projections.”
Tensions in the Middle East continued to simmer. Trump admitted in a separate interview that he was less confident about Iran agreeing to curtail uranium enrichment. In response, Iran warned it could strike U.S. military bases in the region if nuclear talks collapse, reinforcing concerns about supply disruptions due to sanctions.
Meanwhile, OPEC+ is expected to increase output by 411,000 barrels daily in July, marking the fourth consecutive monthly hike. However, analysts believe rising domestic demand in key producers such as Saudi Arabia may neutralise the supply impact. “Stronger internal demand among OPEC+ members could help stabilise prices despite increased production,” said Hamad Hussain of Capital Economics.
In the U.S., slower-than-expected consumer inflation in May strengthened expectations of a Federal Reserve rate cut by September. Lower rates often fuel economic expansion and energy consumption, further supporting oil prices.
Investors are now awaiting fresh U.S. Energy Information Administration data, due at 1430 GMT. Early figures from the American Petroleum Institute show crude inventories dropped by 370,000 barrels last week, suggesting a tighter supply in the short term.
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