Oil prices edge lower on weak China data, but optimism builds around US-China trade talks CY
By Axel Miller | 09 Jun 2025
Oil prices saw a slight pullback on Monday as fresh data from China painted a dimmer picture of demand. Yet, hopes surrounding renewed U.S.-China trade discussions offered some support, helping crude retain much of last week’s strong rally.
As of early Monday trading, Brent crude slipped by 18 cents to $66.29 per barrel, while U.S. West Texas Intermediate (WTI) fell by 15 cents to $64.43. The decline follows a sharp uptick last week, when Brent gained 4% and WTI surged 6.2%—their first weekly gains in three weeks.
The weakness stemmed largely from underwhelming economic data out of China. In May, the country’s export growth slowed to a three-month low, weighed down by ongoing U.S. tariffs. At the same time, producer prices fell at their fastest rate in two years, stoking concerns about deflationary pressures in the world’s second-largest economy.
Refiners in China also dialed back operations. Crude oil imports dipped to the lowest daily rate in four months as both state-owned and independent refineries conducted planned maintenance.
Market watchers noted that the timing was unfortunate for crude prices, which had been approaching key technical levels. However, optimism around scheduled U.S.-China trade talks in London is helping temper investor anxiety.
“The reaction is muted this time, given the potential for positive developments from the trade talks,” said one analyst.
Despite concerns about global demand, expectations of a trade agreement between Washington and Beijing are providing a cushion for oil prices. Investors are betting that such a deal could stimulate economic growth and in turn, lift global fuel consumption.
Last week’s U.S. jobs report, which showed steady unemployment in May, added to the bullish sentiment. It increased the chances of a Federal Reserve rate cut, which would typically boost economic activity and energy demand.
Still, there are longer-term concerns around supply. OPEC+ recently confirmed plans for another significant production hike in July, and analysts expect further increases in August and September. HSBC, for example, flagged downside risks to its $65-per-barrel Brent forecast for late 2025 if output continues to rise.
Industry watchers from Capital Economics believe the faster pace of OPEC+ supply increases may be here to stay, signaling a possible oversupply risk later in the year.
Meanwhile, the price gap between WTI and Brent is narrowing—a result of modest growth in U.S. output, rising OPEC+ production, and potential supply drops in 2026. In North America, wildfires have already disrupted some Canadian production, while strong gasoline demand during the U.S. summer driving season is keeping domestic inventories in check.
U.S. oil rigs, a leading indicator of future supply, declined by nine last week, bringing the total count to 442, according to Baker Hughes. This drop could suggest a slight slowdown in production momentum in the months ahead.
Summary
Oil prices dipped slightly on weak Chinese economic data, but broader market sentiment remains buoyant ahead of crucial U.S.-China trade talks. While short-term support is driven by hopes for improved global demand, growing OPEC+ supply and uncertain long-term output trends could pressure prices in the quarters ahead.
Frequently Asked Questions (FAQs)
1. Why did oil prices fall despite last week’s gains?
Oil prices slipped due to weak economic data from China, including slower export growth and reduced crude imports, which signal lower demand from the world’s second-largest economy.
2. How do U.S.-China trade talks impact global oil prices?
Trade agreements between major economies like the U.S. and China can boost global economic activity, which in turn increases energy demand. Investors are optimistic that a positive outcome from the talks could support oil prices.
3. What is the significance of China’s crude import data?
China’s crude import levels are closely watched because it’s one of the largest oil consumers globally. A decline—like the one seen in May—typically reflects weaker demand or refinery slowdowns, which can weigh on global oil prices.
4. What role does OPEC+ play in influencing oil prices?
OPEC+ (Organization of the Petroleum Exporting Countries and allies) controls a significant share of global oil supply. Any decisions they make about production levels directly influence oil prices due to supply-demand dynamics.
5. Why is the Brent-WTI price gap narrowing?
The narrowing spread between Brent and WTI is driven by rising OPEC+ output, steady U.S. production, and projections of possible supply constraints next year. This makes WTI more competitive relative to Brent.
6. How does the U.S. jobs report affect oil markets?
A strong or stable jobs report can signal economic health, increasing the likelihood of consumer and industrial fuel use. It also influences interest rate expectations, which can affect broader market sentiment and oil demand forecasts.
7. What are the risks of continued OPEC+ production increases?
If OPEC+ continues to ramp up production while demand remains uncertain, it could lead to oversupply, putting downward pressure on global oil prices and affecting revenues for oil-exporting nations.
8. How do U.S. oil rig counts relate to future oil supply?
The rig count is a leading indicator of future oil production. A decline—like the recent drop to 442 active rigs—suggests that U.S. output may slow down, which could support prices if global demand stays steady or rises.
9. What impact have Canadian wildfires had on the oil market?
Wildfires in Canada have disrupted oil production, tightening supply in North America. This contributes to upward pressure on WTI prices, especially during the high-demand summer driving season in the U.S.
10. Is a Federal Reserve rate cut good or bad for oil prices?
A rate cut typically weakens the U.S. dollar and supports economic growth, both of which can increase demand for oil. Therefore, markets often react positively to the prospect of rate cuts.
