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Oil prices rose 1% on Wednesday, rebounding from early losses as reports suggested a possible thaw in U.S.-China relations, even as persistent concerns over a prolonged trade war and slowing global demand continued to weigh on the broader outlook.
As of 09:37 GMT:
- Brent crude futures were up 64 cents to $65.31 per barrel
- West Texas Intermediate (WTI) crude gained 62 cents to $61.95 per barrel
Momentum Shifts on China Trade Hopes
Crude prices initially dipped in early trading but reversed course following a Bloomberg report that cited an anonymous Chinese official suggesting:
- Beijing is open to renewed trade talks, but only if the U.S. shows more respect
- China wants a new primary point of contact in negotiations, signaling frustration with current channels
“While no concrete progress has been made, the market welcomed even the slightest hint of dialogue as a bullish catalyst,” said one commodities analyst.
Still, the path forward remains uncertain, with no official confirmation of renewed negotiations and tariffs still escalating on both sides.
Demand Forecasts Slashed Amid Tariff Fallout
Despite Wednesday’s bounce, the medium-term outlook for oil remains bearish, with major agencies cutting forecasts:
- The International Energy Agency (IEA) now expects 2025 global oil demand to rise by only 730,000 barrels per day, down from 1.03 million bpd in last month’s forecast
- The cut follows a similar downward revision by OPEC earlier this week
The IEA cited Trump’s aggressive tariff policy—which has triggered retaliatory trade barriers from partners like China—as a key factor behind the expected slowdown in energy consumption and investment.
Output and Price Pressure Mounts
Adding to demand concerns, OPEC+ production has been rising, and the uncertainty surrounding the trade war has:
- Dragged oil prices down nearly 13% in April
- Prompted major banks including UBS, BNP Paribas, and HSBC to slash crude price forecasts
“The bullish response to the China headline is likely to be short-lived unless it’s followed by tangible easing of trade tensions,” market strategists warned.
Chinese GDP Beats, But Risks Ahead
On the macro front, China’s Q1 GDP came in stronger than expected:
- 5.4% YoY growth, beating the 5.1% consensus forecast
However, analysts noted that this data predates the most recent round of U.S. tariffs, and future quarters could reflect sharper slowdowns if trade conditions remain strained.
Outlook: Cautious Optimism, Persistent Headwinds
While Wednesday’s price bounce reflects improved sentiment on trade dialogue, the overall oil market remains fragile, with:
- Structural demand downgrades
- Geopolitical risk premiums
- And supply growth from non-OPEC producers still in focus
Unless U.S.-China talks officially resume and result in concrete de-escalation, oil prices may struggle to sustain upward momentum beyond the $65–$67 range for Brent and $62–$64 for WTI in the near term.
