Crude oil prices are set to close the week higher, driven by renewed optimism over a possible trade agreement between the United States and China. Hopes for a resolution to the prolonged tariff war between the two largest economies have lifted market sentiment, despite fresh concerns about slowing global oil demand.
As of Friday, Brent crude traded at $64.64 per barrel, and West Texas Intermediate (WTI) stood at $61.72 per barrel, both posting moderate gains since the start of the week. Reuters reported that oil is heading for a 1% weekly increase, reversing a multi-week losing streak.
U.S.-China Trade Truce Fuels Market Rebound
The market rallied after reports suggested that Washington and Beijing were making progress toward a trade truce. Investors welcomed signs that both countries might reach a mutually beneficial agreement, which could restore confidence in global trade and stimulate energy consumption.
At the same time, reports indicated that the U.S. and Iran were edging closer to a renewed nuclear deal, which could eventually reintroduce Iranian crude to global markets. While this development could add downward pressure on prices, optimism over U.S.-China trade talks has so far offset those concerns.
IEA Lowers Oil Demand Growth Forecast
Meanwhile, the International Energy Agency (IEA) scaled back its forecast for global oil demand growth in 2025. In its May Oil Market Report, the agency predicted that demand, which rose by 990,000 barrels per day (bpd) in the first quarter, would slow to just 650,000 bpd for the remainder of the year.
The IEA blamed economic headwinds and surging electric vehicle (EV) sales for the projected slowdown. It noted that these factors would materially dampen oil consumption, particularly in developed markets.
However, recent import data challenges this outlook. China’s oil imports rebounded in early Q2, and India’s crude purchases hit a record high in March, signaling strong demand across Asia. These trends may force a revision of the IEA’s projections if they persist through the coming quarters.
Japan Refocuses on Oil Amid Transition Uncertainty
Adding to the evolving market landscape, Japanese refiners have scaled back their low-carbon transition investments and redirected their focus to traditional oil refining. This strategic pivot reflects a growing recognition that fossil fuel demand remains robust, particularly in the face of energy security concerns.
Outlook
Crude oil markets are staging a cautious rebound, fueled by geopolitical optimism and resilient demand in Asia. If the U.S. and China finalize a trade deal, oil prices could climb further. However, the possibility of renewed Iranian exports and weaker global growth may limit further gains.
The coming weeks will test whether this recovery signals a true turnaround or just a temporary break in a longer-term downward trend shaped by structural changes in global energy demand.