Main Highlights
- Crude oil prices saw an increase following positive developments in U.S.-China trade relations.
- President Trump’s unexpected shift towards warmer trade rhetoric boosted confidence in increased energy demand.
- Geopolitical tensions eased with progress on Middle East peace and potential resolutions for the Russia-Ukraine conflict.
- U.S. crude oil inventories unexpectedly rose, though they remain below the five-year average.
- OPEC maintained its global oil demand growth forecasts for 2025 and 2026.
Crude oil prices experienced an uptick on Friday, largely influenced by a sudden shift in U.S. President Donald Trump’s stance on trade with China. This change in tone has bolstered confidence in the potential for warmer bilateral trade relations, which could subsequently lead to an increase in global energy demand.
💡 This development is significant for energy markets, as U.S.-China trade dynamics have a substantial impact on global consumption patterns.
Specifically, WTI Crude Oil for November delivery was last observed trading up by $0.20, marking a 0.35% increase, to settle at $57.66 per barrel.
✅ The United States and China represent the two largest economies globally. For the past four to five months, their negotiations aimed at resolving the ongoing tariff war had appeared to be progressing.
Last week, however, renewed trade tensions emerged when China’s export restrictions on rare earth minerals prompted U.S. President Donald Trump to announce new tariffs of 100% on specific Chinese exports to the U.S. This action had fueled concerns about a potential economic slowdown and a subsequent decline in energy demand.
📌 Previously, President Trump had indicated he might not meet with Chinese President Xi Jinping in South Korea as initially planned later this month.
However, in a revealing interview with Fox Business that aired today, President Trump adopted a surprisingly pragmatic tone, stating that the 100% tariffs were not sustainable. He confirmed his intention to proceed with the meeting with President Xi as scheduled and expressed admiration for him.
⚡ This shift in rhetoric from President Trump has spurred markets to anticipate smoother U.S.-China bilateral trade relations, thereby projecting a higher demand for energy resources.
Additionally, the proposed Gaza Peace Plan by President Trump appears to be nearing finalization, with the exchange of prisoners and captives between Israel and Hamas now complete. A ceasefire is in effect, and no adverse events have been reported thus far. Consequently, the geopolitical risk premium that previously affected markets has dissipated.
📊 Following his success in brokering a peace deal in the Middle East, President Trump is now focusing his attention on finding a resolution to the protracted Russia-Ukraine war.
Yesterday, President Trump announced plans to meet with Russian President Vladimir Putin in Budapest, Hungary, within the next two to three weeks. High-level delegations from both sides are expected to attend, with the objective of discussing potential pathways to end the conflict. This diplomatic engagement could potentially lead to increased flows of Russian oil into the global market.
💡 Monitoring diplomatic progress between Russia and Ukraine is crucial for anticipating future oil supply dynamics.
U.S. Crude Oil Inventories and Production
Data released yesterday by the U.S. Energy Information Administration (EIA) indicated that for the week ending October 10, crude oil inventories increased by 3.524 million barrels. This figure significantly exceeded the expectations of economists, who had predicted a modest rise of only 0.1 million barrels.
📍 Despite the recent increase, U.S. crude oil inventories stand at 423.8 million barrels, which is approximately 4% below the five-year average for this period of the year.
During the same week, gasoline inventories decreased by 267,000 barrels. Distillate inventories saw a reduction of 4.529 million barrels, and heating oil inventories fell by 519,000 barrels.
Furthermore, the EIA data revealed an increase in U.S. oil production, reaching 13.636 million barrels per day.
✅ In a separate report, Baker Hughes Company stated that for the week ending October 17, the number of active crude oil rigs in the U.S. remained unchanged at 418 from the previous week. The total number of active rigs increased to 548, up from 547 in the prior week.
OPEC Forecasts and Other Market Factors
In its latest monthly oil market report, the Organization of the Petroleum Exporting Countries (OPEC) largely maintained its global oil demand growth forecasts. The alliance anticipates demand to grow by 1.3 million barrels per day in 2025 and 1.4 million barrels per day in 2026. Similarly, OPEC kept its supply projections steady, expecting supplies from producers outside the broader OPEC+ alliance to rise by 810,000 barrels per day in 2025 and 630,000 barrels per day in 2026.
💡 OPEC’s steady forecasts suggest a cautious outlook on sustained demand growth despite potential supply increases.
Meanwhile, the government shutdown in the U.S. has now entered its 17th day.
This week, U.S. Federal Reserve Chair Jerome Powell acknowledged a notable slowdown in hiring and indicated the necessity of ending quantitative tightening measures.
⚡ Despite the absence of key official economic releases, anticipation is high among traders regarding potential interest rate cuts by the U.S. central bank.
Fundfa Insight
The recent surge in crude oil prices is closely tied to shifts in geopolitical and trade landscapes. While positive developments in U.S.-China relations and potential de-escalation of regional conflicts are supportive factors for energy demand, mixed inventory data and ongoing domestic economic concerns in the U.S. introduce an element of uncertainty into the market outlook.