Oil Prices Rebound Amid OPEC+ Discussions and Tariff Uncertainty

Oil prices experienced a recovery on Thursday, offsetting some of the losses incurred in the previous session. This fluctuation occurs as investors carefully assess a potential increase in OPEC+ output alongside contradictory statements from the White House regarding tariffs and ongoing nuclear discussions between the U.S. and Iran.

Brent crude futures saw an increase of 53 cents, equivalent to 0.8%, reaching $66.65 per barrel as of 0706 GMT. Similarly, U.S. West Texas Intermediate crude rose by 55 cents, or 0.88%, to $62.82 per barrel.

Earlier, prices had declined by 2% during the previous trading session. This drop followed reports indicating that several OPEC+ members were considering proposing an acceleration of oil output increases for June, marking the second consecutive month of such adjustments.

Analysts’ Perspectives

Analysts at ING noted that while a risk-on sentiment generally boosted most risk assets, oil lagged behind due to disagreements within OPEC+.

Kazakhstan, responsible for approximately 2% of global oil production and having consistently surpassed its quota in the past year, stated its intention to prioritize national interests over those of OPEC+ when determining production levels.

Past instances of disputes among OPEC+ members regarding adherence to production quotas have occurred, including one that led to Angola’s departure from OPEC+ in 2023.

The ING analysts cautioned that further discord among OPEC+ members poses a significant downside risk, potentially triggering a price war.

Trade Talk Signals

Positive signals regarding potential progress in trade discussions between the U.S. and China provided some support to prices.

Reports indicated that the White House might be willing to reduce tariffs on Chinese goods to as low as 50% to facilitate the commencement of negotiations.

The U.S. Treasury Secretary previously stated that the existing import tariffs—145% on Chinese products entering the U.S. and 125% on U.S. products entering China—were unsustainable and would need to be lowered before trade talks could proceed.

However, the White House Press Secretary later clarified that there would be no unilateral reduction in tariffs on goods from China. Rystad Energy analysts suggest that a prolonged trade conflict between the U.S. and China could halve China’s oil demand growth this year, reducing it from 180,000 barrels per day to 90,000 bpd.

Additionally, there are reports that the previous administration is considering tariff exemptions on car part imports from China.

US-Iran Nuclear Talks

Potentially exerting downward pressure on oil prices, the U.S. and Iran are scheduled to hold another round of discussions regarding a possible agreement to reinstate restrictions on Iran’s uranium enrichment program.

The market is closely monitoring these talks for any indications that a reconciliation between the U.S. and Iran could lead to the easing of sanctions on Iranian oil, thereby increasing supply.

However, the U.S. recently imposed new sanctions on Iran’s energy sector, prompting a response from Iran’s foreign ministry, which characterized the move as demonstrating a lack of goodwill and seriousness regarding dialogue with Tehran.