Oil Edges Up But Heads for Weekly Fall Under Supply Pressure

Oil prices increased for a second consecutive session on Friday, supported by the possibility of easing tensions in the U.S.-China trade war; however, the market was poised for a weekly drop of approximately 2 per cent due to worries about oversupply. Brent crude futures rose by 31 cents to $66.85 a barrel by 0650 GMT, having decreased 1.7 per cent so far this week. U.S. West Texas Intermediate (WTI) crude increased by 35 cents to $63.12 a barrel after a weekly drop of 2.4 per cent. "Today, oil prices are modestly higher as the market reacts to indications of reduced tensions regarding Trump's tariffs and a possible change in the Fed's policy position, aiding a wider market recovery," noted LSEG senior analyst Anh Pham, per Reuters.

"However, on a weekly basis, prices are decreased due to ongoing worries about oversupply from OPEC+, while the outlook for demand remains unclear amidst continuing trade tensions." "A more robust U.S. dollar has also increased pressure on crude prices," he mentioned. On Thursday, U.S. President Donald Trump announced that trade conversations between the U.S. and China were in progress, countering Chinese assertions that no talks had occurred. China is contemplating the possibility of waiving its 125 per cent tariffs on certain U.S. imports and is requesting companies to submit lists of products that might qualify, marking the clearest indication of Beijing's anxiety regarding the economic consequences stemming from the trade conflict.

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China increased its tariffs after Trump revealed elevated taxes on Chinese products. Oil prices plummeted earlier this month following the tariffs, which raised fears about worldwide demand and triggered a sell-off in financial markets. Concerns are increasing regarding surplus supply. According to a report by Reuters earlier this week, multiple OPEC+ members proposed that the organisation expedite oil production increases for a second consecutive month in June. Russian Foreign Minister Sergey Lavrov stated in an interview with CBS News that the United States and Russia are progressing towards ending the war in Ukraine, but certain specific aspects of a deal still need to be finalised.

A stop to Russia's conflict in Ukraine and the relaxation of sanctions might enable increased Russian oil to reach international markets. Russia, part of the OPEC+ coalition, which comprises the Organisation of the Petroleum Exporting Countries, ranks among the largest oil producers globally, alongside the U.S. and Saudi Arabia. At the same time, worldwide oil demand has increased over the last week, largely because of a surge in gasoline usage in the U.S., while the demand for distillates in the nation stayed strong as chilly weather continued into April, analysts from JPMorgan Commodities Research observed. Nevertheless, it still represented a 200,000 barrel-per-day shortfall compared to their existing projections for the month, as demand during the first two weeks was weak, they noted.