Oil steady on potential Opec+ output increase

Beijing — Oil prices ticked up on Thursday after falling nearly 2% in the previous session, with investors weighing a potential Opec+ output increase against conflicting tariff signals from the White House and ongoing US-Iran nuclear talks.

Brent crude futures rose 8c, or 0.12%, to $66.20 a barrel by 5.05am GMT, while US West Texas Intermediate (WTI) crude gained 9c, or 0.14%, to $62.36 a barrel.

Prices settled down 2% in the previous trading session after Reuters reported that several Opec+ members would suggest the group accelerate oil output increases for a second month in June, citing three sources familiar with the Opec+ talks.

“While a risk-on move lifted most risk assets yesterday, oil was left behind thanks to Opec+ discord,” ING analysts wrote in a note.

Kazakhstan, which produces about 2% of global oil output and has repeatedly exceeded its quota over the past year, said it would prioritise national interest, rather than that of Opec+ in deciding production levels, Reuters reported on Wednesday.

There have previously been disputes among Opec+ members over compliance with production quotas, one of which resulted in Angola exiting Opec+ in 2023.

“Further disagreement between Opec+ members is a clear downside risk, as it could lead to a price war,” the ING analysts said.

Signs that the US and China could be moving closer to trade talks supported prices. The Wall Street Journal reported that the White House would be willing to lower its tariffs on China to as low as 50% to open up negotiations.

US treasury secretary Scott Bessent said on Wednesday that current import tariffs — of 145% on Chinese products headed into the US and 125% on US products headed into China — were not sustainable and would have to come down before trade talks between the two sides could begin. White House press secretary Karoline Leavitt later told Fox News, however, that there would be no unilateral reduction in tariffs on goods from China.

Rystad Energy analysts say a prolonged US-China trade war could cut China’s oil demand growth in half this year to 90,000 barrels a day (bbl/day) from 180,000bbl/day.

Trump was also mulling tariff exemptions on car part imports from China, the Financial Times reported on Wednesday.

Potentially putting downward pressure on oil prices, the US and Iran will hold a third round of talks this weekend on a possible deal to reimpose restraints on Tehran’s uranium enrichment programme. The market is watching the talks for any sign that a US-Iran rapprochement could lead to the easing of sanctions on Iran oil and boost supply.

But the US on Tuesday put fresh sanctions on Iran’s energy sector, which Iran’s foreign ministry spokesperson said showed a “lack of goodwill and seriousness” over dialogue with Tehran. 

Reuters