Oil market finds direction in US/China trade talks
Oil, fundamental analysis
Crude prices broke out of the 4-week period of consolidation to the upside this week and breached a key technical level as well. Upward momentum came in the form of perceived trade talks progress between the US and China as well as stalled headway in key geopolitical negotiations.
A large increase in refined product inventories did not offset a drop in crude stocks, further adding fuel to the rally. The market reaction to the OPEC+ meeting last Saturday, where they confirmed the July output increase, was muted as it was expected.
However, a bearish signal came in the form of Saudi Arabia lowering their price for exports to Asia. Other than the China trade news, multiple economic signals this week were negative but didn’t impact the week’s rally. WTI’s High for the week was Friday’s $64.80/bbl while the Low was Friday’s $59.75. Brent North Sea crude had a High of $66.60 on Friday and a Low of $63.00 on Monday. Both grades are higher week-on-week while the Brent/WTI spread has tightened to ($2.85).
Optimism on future demand was spurred by several events this week, including the report that Pres. Trump and China’s Xi Jinping spoke Thursday about continuing trade discussions between the two superpowers. (China has not bought US crude for 2 consecutive months.) Additionally, geopolitical risk remains as a lack of progress in both the Russia/Ukraine peace talks and US/Iran nuclear negotiations are seen as keeping barrels off the market. In Iran’s case, the country recently ordered a significant amount of ballistic-missile materials from China, furthering concerns that not only a settlement agreement will not be reached but that the US Treasury will now impose sanctions on more entities doing business with Iran. And wildfires in Canada’s Alberta Province have led to the shutdown of about 340,000 b/d there.
The OPEC+ group is expected to roll out production hikes in both August and September after confirming a July increase. And, while the summer demand period may absorb the additional July/August supply, September’s higher output could soften prices at summer’s end.
Furthermore, despite US sanctions, Venezuelan oil exports remain stable as China receives more shipments.
The Energy Information Administration (EIA)’s Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week decreased while refined products increased. The Strategic Petroleum Reserve continues making small gains. Total US oil production held at 13.4 million b/d vs. 13.1 last year at this time.
The OECD this week lowered its US growth forecast to 1.6% from 2.2% while urging more countries to negotiate trade deals. Factory orders declined by 3.7% last month, higher than an expected 3.1% drop and April’s 3.4% growth. Total US job growth for May slowed but was above expectations as 139,000 positions were added vs. a forecast of 125,000. Unemployment held at 4.2%. However, March and April numbers were revised downward by a composite 95,000. Applications for unemployment benefits rose by 8,000 to 247,000 last week vs. an expected 235,000. It was the highest weekly change since last October.
Private sector payrolls slowed to just +37,000 last month after a +60,000 in April. This was the slowest pace of growth since 2023. But all 3 major US stock indexes were higher week-on-week on the May jobs report. The USD is off slightly after being lower most of the week. However, it has not kept crude prices from moving higher.
Oil, technical analysis
July NYMEX WTI Futures have moved above the 8- and 13- and 20-day Moving Averages after breaking out of the consolidation pattern to the upside. Volume is below average at 220,000. The Relative Strength Indicator (RSI), a momentum indicator, is overbought at 61. The Upper-Bollinger Band limit has been breached which indicates 2-Standard Deviations above the Mean, normally a sell signal as prices tend to revert to the Mean. Resistance is now pegged at $65.00 if this rally is to continue. Near-term Support is $64.10 (the Upper-Bollinger Band limit.
Looking ahead
It’s safe to say that the coming week will probably not see much advancement in the Russia/Ukraine or US/Iran talks. That makes the trade wars centerstage. Again, there’s not much hope that a sudden trade deal with China will actually get done but any announcement on progress there would be bullish for oil prices.
As the case has been for many weeks now, traders will be focused on whatever Pres. Trump says regarding tariffs. The Weekly Petroleum Status Report indicated a drop in gasoline demand of -1.1 million bld. for last week. Given the data covers Saturdays through Fridays of each week, that large decline encompassed the entire Memorial Day Weekend which is a surprising start to the summer driving season. Exports of Canadian crude to South Korea have begun for the first time under the Trump administration.
Natural gas, fundamental analysis
July natural gas futures got a boost early this week on the larger energy complex rally and trader perception of summer power generation demand despite a mild near-term forecast and a sixth-straight triple-digit storage injection. Some technical buying after last week’s “double-bottom” on the charts helped fuel the uptrend.
The week’s High of $3.80/MMbtu occurred Friday (nearing last week’s High) with the week’s Low of $3.50 was Monday. Supply last week was -0.6 bcfd to 112.4 bcfd vs. 113 the prior week. Demand was -1.5 bcfd to 96.2 bcf vs. 97.7 bcfd the week prior, with the biggest drop in Power generation on mild weather.
Exports to Mexico were 7.2 bcfd vs. 7.4 the prior week. LNG exports were 14.4 bcfd vs. 15.5 bcfd the prior week due to maintenance outages. US LNG shipments for May slowed to 8.9 metric tonnes, down from April’s 9.3 metric tonnes on maintenance outages. 68% went to Europe while 21% was shipped to Asian markets. European gas prices were most recently higher at $11.70/MMbtu with Asian prices around $11.85. The EIA’s Weekly Natural Gas Storage Report indicated an injection of 122 bcf, above the forecasted +113 bcf and a 5-year average of +98 bcf.
Total gas in storage is now 2.598 tcf, rising to 10% below last year and 4.7% above the 5-year average.
Natural gas, technical analysis
July 2025 NYMEX Henry Hub Natural Gas futures have risen above the 8-, 13- and 20-day Moving Averages. Volume was 115,000 and lower than the recent average. The RSI is neutral at 53. Support is pegged at $3.73 (20-day MA) with Resistance at $3.85.
Looking ahead
In a move that will impact ethane prices and by proxy, natural gas prices, the US Commerce Department has notified ethane exporters such as Enterprise Products and Energy Transfer that they will now need a license to ship C2 to China citing, “an unacceptable risk of military end-use in China”. This could lead to a backlog of ethane which could, in turn, lead to more ethane rejection and lower natural gas prices.
Demand for US power generation looks very weak over the next 2 weeks except for areas in the Rocky Mountain regions so, storage refills should continue to grow. While there is a storage deficit compared to year-ago levels, volumes are comfortably above the 5-year average. Until A/C load kicks-in, look for large storage injections to continue. As the maintenance at LNG plants ends, demand for feedstock gas will increase.

Tom Seng
Dr. Tom Seng is an Assistant Professor of Professional Practice in Energy at the Ralph Lowe Energy Institute, Neeley School of Business, Texas Christian University, in Fort Worth, Tex.