Oil Prices Climb as U.S.-China Resume Trade Talks
Global oil prices bounced back on Thursday, June 5, 2025, as news emerged of renewed communication between the United States and China regarding trade relations. This positive diplomatic development between the world’s two largest economies helped stabilize the energy market after a dip earlier in the week due to disappointing U.S. inventory data.
Crude Prices Recover Amid Trade Optimism
Brent crude futures closed at $65.34 per barrel, gaining 48 cents or 0.7%. Meanwhile, U.S. West Texas Intermediate (WTI) crude rose by 52 cents, or 0.8%, ending the day at $63.37. This recovery followed a 1% price decline the day before, which was largely triggered by higher-than-expected increases in U.S. gasoline and distillate inventories, indicating weakening fuel demand.
The price recovery is being viewed by analysts as a direct response to easing trade tensions. Phil Flynn, a senior market analyst at Price Futures Group, noted that if the U.S. and China can avoid further escalation in their trade dispute, the result could be increased demand projections from both nations. With the U.S. and China accounting for a significant share of global oil consumption, any sign of improved trade relations can quickly influence market expectations.
Trade Call Spurs Market Confidence
The turnaround in sentiment followed a call between U.S. President Donald Trump and Chinese President Xi Jinping. According to Chinese state media, the conversation took place at the request of the U.S. side. President Trump later described the exchange as “very positive,” with the two sides agreeing to arrange more talks at a lower level. He told reporters that the U.S. was “in very good shape” regarding trade with China.
The phone call not only had implications for energy markets but also calmed broader investor fears over a potential escalation in trade-related tensions. Canadian officials, including Prime Minister Mark Carney, are also maintaining direct contact with the U.S. administration in efforts to resolve separate trade issues, including steel and aluminum tariffs. These diplomatic efforts collectively offer some reassurance to global markets.
Production Risks and Economic Indicators Balance Outlook
Despite the boost from trade news, oil markets continue to wrestle with mixed signals. Wildfires in Canada, a key oil-producing nation, pose risks to production, offering short-term support for prices. However, those gains are tempered by broader supply concerns.
Saudi Arabia, the world’s top crude exporter, announced a price cut for July deliveries to Asian markets — nearly the lowest price point in two months. This move follows OPEC+’s recent decision to increase output by 411,000 barrels per day starting in July. According to sources, Saudi Arabia is pushing a strategy that could eventually unwind 2.2 million barrels per day in production cuts between June and October. The aim appears to be regaining market share by discouraging other producers from exceeding quotas.
On the economic front, recent U.S. data highlighted signs of a cooling economy. The services sector, which represents more than two-thirds of American economic activity, contracted in May for the first time in nearly a year. Additionally, jobless claims rose for the second consecutive week, with the Labor Department reporting a rise in new unemployment filings for the week ending May 31. These developments suggest potential headwinds for domestic oil demand.
Investors are now looking ahead to the U.S. nonfarm payrolls report for May, which is expected to shape the Federal Reserve’s future interest rate decisions. Meanwhile, geopolitical risks in the Middle East and ongoing shifts in global energy policy, such as renewable energy expansion in regions like the Taiwan Strait, continue to influence long-term market dynamics.
As the balance of geopolitical risks, trade diplomacy, and supply shifts play out, oil markets are likely to remain sensitive to global headlines. The renewed dialogue between the U.S. and China offers hope for more stable economic growth and, in turn, a more predictable energy demand curve in the months ahead.
