Oil News: US-China Talks Boost Crude Outlook but Fed and Dollar Limit Upside

Crude Oil Holds Gains as Trade Hopes Offset Supply and Rate Pressures

Light crude oil futures are edging higher Thursday, recovering from earlier losses in the week. After a strong midweek rally to $60.26 stalled at resistance levels of $59.68 and $60.09, traders are now watching key technical levels for direction. Minor support at $57.78 remains pivotal; holding above this zone could trigger renewed buying and another attempt to break above the weekly high.

At 09:10 GMT, Light Crude Oil Futures are trading $58.76, up $0.69 or +1.19%.

US-China Trade Talks Offer Near-Term Support

Crude oil prices are finding modest support from optimism surrounding upcoming U.S.-China trade talks. Scheduled for May 10 in Switzerland, the talks between U.S. Treasury Secretary Scott Bessent and China’s top economic official are raising hopes of easing tensions between the world’s two largest oil consumers. This positive sentiment has helped Brent crude stabilize above $61 per barrel, despite broader macroeconomic concerns.

Rising Supply from OPEC+ Adds Pressure

However, the upside remains limited as OPEC+ has announced plans to increase output for a second straight month. The coalition will add 411,000 barrels per day to global supply in June, a decision made despite falling prices and softening demand projections. The move is likely to cap any short-term rallies, especially if broader consumption concerns tied to global economic uncertainty persist.

Fed Policy, Strong Dollar Weigh on Commodities

The U.S. Federal Reserve’s decision to hold rates steady has added further pressure on commodity markets. While rates remain unchanged, the Fed flagged potential inflation and employment concerns, boosting the U.S. dollar. A stronger dollar typically weighs on oil prices by making crude more expensive for holders of other currencies, adding a headwind for bullish traders.

Mixed Oil Prices Forecast as Supply Risks Dominate

Analysts are divided on oil prices projections. Citi Research has cut its three-month Brent forecast to $55 per barrel, citing the potential for a U.S.-Iran nuclear deal that could lift sanctions and increase supply. The bank estimates a 60% chance of a deal and warns that prices could dip to $50 if it materializes. Conversely, no deal or escalatory action could lift prices back toward $70. Meanwhile, ANZ maintains its near-term outlook at $55, cautioning that risks remain skewed to the downside.

Market Outlook: Neutral to Bearish Near-Term

Despite short-term support from geopolitical optimism, the crude oil market remains under pressure from increasing supply and macroeconomic headwinds. Unless prices can hold key technical support and overcome overhead resistance, traders should brace for a potential retest of the $55.30–$54.48 value zone. The near-term outlook is neutral to bearish, with supply-driven pressures likely to dominate.

More Information in our Economic Calendar.