Oil prices hold steady with U.S.-China trade talks in focus

Investing.com-- Oil prices held steady Monday as investors remained cautious ahead of key U.S.-China trade talks in London later in the day,

At 05:40 ET (09:40 GMT), Brent Oil Futures inched 0.1% higher to $66.51 per barrel, and West Texas Intermediate (WTI) crude futures gained 0.1% to $64.59 per barrel.

Both contracts jumped more than 4% last week as a better-than-expected U.S. jobs report and resumed trade talks between the U.S. and China reduced worries of a global economic slowdown.

Markets eye U.S.-China talks 

Senior U.S. officials, including Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, are set to meet Chinese Vice Premier He Lifeng in London to discuss tariff rollbacks, export controls, and broader bilateral trade concerns. 

The talks come amid persistent global economic uncertainty and strained supply chains, with both sides looking to stabilize a relationship that has frayed over issues ranging from technology to rare earth access.

The upcoming talks follow a tentative diplomatic thaw reached in Geneva last month and mark the first formal engagement between the two sides since then. Markets are hoping for signs of progress that could ease pressure on global trade flows and commodity demand.

Crude markets have been under pressure from global trade worries and weak macroeconomic indicators out of China.

Oil has also come under renewed pressure as the Organization of Petroleum Exporting Countries and allies, collectively known as OPEC+, have steadily accelerated production this year. 

China’s data adds to caution

Adding to market caution, China’s exports growth slowed to a three-month low in May as U.S. tariffs slammed shipments, data showed, while factory-gate deflation deepened to its worst in two years, heaping pressure on the world’s second-largest economy both at home and abroad.

The data also showed that China’s crude oil imports declined in May to the lowest daily rate in four months, as state-owned and independent refiners underwent widespread planned maintenance.

Speculators buy crude contracts

Speculators bought 42,496 lots in NYMEX WTI over the last reporting week, leaving them with a net long of 163,078 lots as of last Tuesday, while buying in ICE (NYSE:ICE) Brent was more modest, with speculators purchasing 8,813 lots, leaving them with a net long of 167,763 lots. 

"This move was predominantly driven by fresh buying, producing the largest weekly increase since early January," said analysts at ING. "The U.S. market has been more constructive recently, which is also reflected in the narrowing of West Texas Intermediate’s (WTI) discount to Brent. The Canadian wildfires, which led to some production shut-ins, provided some relative support to WTI."

Drilling activity in the U.S. market has also continued to slow.

Baker Hughes (NASDAQ:BKR) data shows that the oil rig count fell for a sixth consecutive week, the longest period of declines since mid-2023. The rig count fell by 9 last week to 442, taking the total decline over the last 6 weeks to 41.

"The combination of increased OPEC+ output, modest U.S, crude oil supply growth and the potential for output declines next year supports the idea of a narrowing in the Brent-WTI spread," added ING.

Ayushman Ojha contributed to this article