Oil Prices Edge Higher Amid Trade Talks and Decline in US Output

Oil prices rose modestly on Wednesday, climbing slightly above recent four-year lows, as markets reacted to upcoming US-China trade talks and signs of slowing oil production in the United States.

Brent crude futures were up 76 cents, or 1.22 percent, trading at $62.91 a barrel as of 10:08 a.m. Saudi time. Meanwhile, US West Texas Intermediate (WTI) crude gained 84 cents, or 1.42 percent, to reach $59.93 per barrel.

The gains come after both benchmarks suffered sharp losses in recent weeks, falling to their lowest levels since 2021. The downturn was triggered by a surprise move from the OPEC+ alliance to accelerate oil production, raising concerns about a potential supply glut amid lingering fears over weakening demand.

Investor sentiment received a boost after it was announced that the US and China would resume trade negotiations this weekend — a development seen as critical for improving the global demand outlook.

“Brent crude is trading higher as the market welcomes the restart of US-China trade talks, extending a relief rally,” said commodities strategists at ING. “However, to truly lift demand expectations, meaningful progress on tariff reductions will be essential.”

Adding to the positive momentum was news of reduced drilling activity in the US. Falling oil prices have prompted several energy companies, including Diamondback Energy and Coterra Energy, to scale back operations. Analysts say this could help stabilize the market by easing output pressures.

“The combination of declining prices and reduced rig activity increases the likelihood that US oil production will slow in the coming months,” said Daniel Hynes, senior commodity strategist at ANZ Bank.

Further supporting prices, crude stockpiles in the US fell by 4.5 million barrels in the week ending May 2, according to preliminary data from the American Petroleum Institute. Official figures from the US Energy Information Administration are expected later today, with analysts predicting an average drawdown of 800,000 barrels.

Signs of improving demand also buoyed the market. Consumer spending in China picked up during the May Day holiday, and European companies are now forecast to post modest first-quarter earnings growth of 0.4 percent — a reversal from earlier expectations of a decline.

All eyes are also on the US Federal Reserve, which is widely expected to maintain interest rates amid economic uncertainty tied to ongoing trade tensions.

The combination of trade optimism, tightening US supply, and early signs of rebounding demand have given oil markets some breathing room, though analysts caution that the outlook remains fragile.