Market Overview: A Week of Optimism and Sanctions

The oil market experienced a notable upswing Thursday, fueled by optimism surrounding a potential U.S.-U.K. trade agreement and anticipated trade discussions wiht China. After an initial dip to $57.74, the market rebounded, recovering much of the previous day’s losses. This positive trajectory was further supported by renewed sanctions against Iranian oil exports.

The June West Texas Intermediate (WTI) contract settled at $59.52, a gain of $1.82.Meanwhile, the July Brent contract closed at $62.84, up $1.72. Product markets also saw gains, with heating oil rising 6.34 cents to $2.04 and the Reformulated Blendstock for Oxygenate Blending (RBOB) market increasing 5.76 cents to $2.0854.

Trade Winds: U.S.-U.K. Deal and China Talks

Optimism surrounding trade played a notable role in the market’s performance.The proclamation of a trade deal between the U.S. and Britain, coupled with hopes for progress in upcoming U.S.-China trade talks, buoyed investor sentiment.

U.S. Treasury Secretary Scott Bessent was scheduled to meet with China’s top economic official in Switzerland on Saturday for negotiations aimed at resolving the ongoing trade war that has disrupted the global economy.

Sanctions Bite: Iran’s Oil Exports Under Pressure

The U.S. continued its pressure campaign against Iran’s oil exports by announcing sanctions against a third Chinese autonomous oil refinery and port terminal operators in China for purchasing Iranian oil. This move further tightened the supply of oil in the market, contributing to the price increase.

The U.S. Treasury designated the Hebei Xinhai Chemical Group refinery and three companies for operating a terminal at Dongying port in Shandong province.

Sources indicated that recent U.S.sanctions on two smaller Chinese refiners for buying Iranian oil have created difficulties in receiving crude, leading them to sell product under othre names, demonstrating the impact of washington’s increased pressure on Tehran’s largest oil buyer.

Basic Factors: OPEC Output and Fed Policy

OPEC oil output fell in April, despite a scheduled output increase taking effect, primarily due to a cut in venezuelan supply and smaller drops in Iraq and Libya, according to a Reuters survey. The survey revealed that OPEC produced 26.60 million barrels per day (bpd) in April, down 30,000 bpd from March’s total, with cuts by some producers offsetting higher Iranian supply. This reduction occurred despite OPEC+ beginning to unwind its most recent layer of output cuts in April.

U.S.President Donald Trump renewed his criticism of Federal Reserve Chairman Jerome Powell, complaining that the Fed is refusing to lower interest rates. He stated that cutting interest rates would be like jet fuel for the economy but he doesn’t want to do it.

U.S.-U.K. Trade deal Details

U.S. President donald Trump and British Prime Minister Keir Starmer announced a breakthrough deal on trade that maintains a 10% tariff on goods imported from the U.K., while Britain agreed to lower its tariffs to 1.8% from 5.1% and provide greater access to U.S. goods. Britain’s car industry will see U.S. tariffs immediately cut to 10% from 27.5%, while levies on steel and aluminum will fall to zero.

President Trump said the U.S.-UK trade deal will create an aluminum and steel trading zone and secure the pharmaceutical supply chain, although he said some of the details are being written up.

Technical Outlook: Key levels to Watch

The oil market is expected to remain well-supported ahead of the U.S.-china trade talks. Further sanctions on iran’s oil exports are also likely to contribute to upward momentum. Key resistance levels to watch are $60.05, $60.26, $60.43, $61.22, and $62.07. Support is seen at $57.74, $57.03, $55.30, and $54.67.

Early Market call (8:45 AM EDT)

• WTI – Jun: $61.14, up 86 cents
• RBOB – Jun: $2.1175, up 2.11 cents
• HO – Jun: $2.0768, up 1.95 cents