U.S./China Trade Truce Fails To Sway Range Bound Oil Trading

Meanwhile, fear-mongering resumes over the prospect of a global supply glut: File Image/Pixabay

A perceived truce as well as a lowering of tariffs stemming from talks between U.S. president Donald Trump and China president Xi Jinping had surprisingly little impact on oil prices Thursday, apart from the commodity eking out minuscule gains.

Brent settled up 8 cents at $65.00 per barrel, while West Texas Intermediate settled up 9 cents at $60.57.

Tamas Varga, analyst at PVM, explained the disappointing trading session by pointing out that the agreement between China and the U.S. was more of a de-escalation of tension than a structural shift in the relationship; for the record, highlights of the agreement included Trump agreeing to reduce tariffs to 47 percent from 57 percent in exchange for Beijing restarting rare earths exports and getting tough on the illicit fentanyl trade.

The sanctions against Russia remained of secondary interest to oil analysts on Thursday, even though hostilities between the former Soviet Union and Ukraine were as intense as ever, with over 700 Russian missile strikes on Ukraine's energy infrastructure overnight causing nationwide power restrictions and leaving three people dead.

As for the sanctions themselves, Lukoil on Thursday said it would sell all of its international assets to Switzerland-based commodity trader Gunvor, "as a result of Russia's lack of serious commitment to a peace process to end the war in Ukraine."

Lukoil has faced escalating restrictions on its global operations since the first Western sanctions were imposed following Russia's invasion of Ukraine.

Also on Thursday, and despite recent scepticism over persistent warnings of a global supply glut, Tyler Richey, co-editor at Sevens Report Research, told media that the U.S./China trade truce will "not change the current physical market math that still points to a sizable, price-negative oil surplus in 2026."

Richey added that WTI prices "could fall as low as the mid-$30s within a year if the sizable physical market surplus expected in 2026 becomes reality."