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Highlights
- Oil dips to two-week low amid supply glut fears
- Rising US-China trade tensions dampen demand outlook
- Crude inventories defy industry forecasts with surprise build
Oil markets have come under renewed pressure, marking their sharpest decline in two weeks, as a combination of global supply concerns and geopolitical trade tensions unsettled investors. West Texas Intermediate (WTI) futures hovered around $62 per barrel after a steep 3.2% decline midweek, while the international benchmark Brent crude settled slightly higher, above $66.
The retreat in oil prices comes as members of OPEC and its allies (collectively known as OPEC+) weigh a potential boost in crude output. A growing rift within the alliance over quota compliance could prompt certain countries to advocate for a significant supply increase during the upcoming June meeting. This internal discord raises questions about the group’s cohesion and its ability to manage production levels effectively.
Meanwhile, market sentiment is also being dragged down by escalating trade tensions between the United States and China. Investors are increasingly concerned that tit-for-tat tariffs between the world’s two largest economies could dampen global economic growth, thereby reducing future demand for energy. While there have been some signs of diplomatic progress, US Treasury Secretary Scott Bessent clarified that no unilateral tariff relief has been offered by President Donald Trump, keeping uncertainty alive in the market.
Adding to the market’s bearish tone, US government data revealed an unexpected increase in domestic crude inventories. Stockpiles rose by 244,000 barrels last week, contrasting sharply with industry estimates that had forecast the largest drawdown of the year. The mismatch between expectations and actual figures suggests that demand may not be keeping pace with supply, further contributing to price weakness.
The current landscape has created a complex backdrop for energy markets, with traders closely monitoring both the upcoming OPEC+ meeting and ongoing developments in the US-China trade dialogue. Volatility is likely to persist as the market seeks clarity on production strategies and trade policy direction.
As these factors continue to play out, energy stocks and related sectors may experience heightened sensitivity. Investors keeping an eye on companies such as Woodside Energy (ASX:WDS) and Santos Limited (ASX:STO) will likely remain alert to global supply shifts and geopolitical risks, both of which have a direct bearing on future profitability and strategic planning.
