Oil markets hold steady on trade talks and wildfire risks

[WORLD] Oil markets are moving with measured caution as early signs of progress emerge from US-China trade talks, nudging prices upward in a climate of renewed diplomacy and tightening supply. It’s a delicate balancing act. For commodity desks and energy investors alike, this unusual overlap of geopolitical easing and physical disruption isn’t mere background static—it’s actively redrawing short-term price expectations and forcing a rethink of hedging playbooks. When fundamentals and politics collide, assumptions don’t just shift—they get rewritten. The question now isn’t just whether talks will hold, but how long fundamentals can stay decoupled from fragile optimism.

Key Takeaways

Trade negotiators from the US and China are convening in London this week, injecting a fresh dose of optimism into markets hoping to sidestep a tariff clash that could undercut global oil demand.

West Texas Intermediate (WTI) crude futures rose 0.2% to $64.69 per barrel, while Brent crude futures gained 0.2% to $66.56 per barrel.

Wildfires in key oil-producing regions of Canada are disrupting output, adding supply-side pressure.

Saxo Bank’s Ole Hansen notes these factors are lending short- to medium-term support to oil prices.

Markets continue to walk a tightrope, swayed by every diplomatic twist and production hiccup as they juggle tepid demand against increasingly brittle supply lines.

Comparative Insight

Geopolitics has long set the tempo for oil markets—but the current landscape carries an uncanny echo of 2019. Back then, it was US-China trade wars and Middle East flashpoints rattling prices. Today, the drivers have shifted, yet the volatility remains. This time around, it’s not just diplomatic uncertainty dragging at sentiment—it’s the mounting toll of climate-linked disruptions. The choreography may have changed, but the dance is no less unpredictable. This time, though, the risk to supply is coming not from straits or sanctions, but from wildfires and weather. In 2023 alone, blazes in Alberta wiped out nearly 300,000 barrels per day—remarkably close to recent estimates of weather-related losses.

Traditionally, Asian demand giants like India and China have cushioned global volatility by tapping or building reserves. But that playbook may offer less protection now. This time, though, that buffer may prove thinner. With inventories tighter and supply risks mounting, the usual playbook is looking far less reassuring. With inventories tighter across the board, the margin for error is thinner—and every shock lands harder.

What’s Next

Oil price stability in the near term hinges on two pressure points: the fate of trade negotiations and the severity of Canada’s production setbacks. A breakdown at the negotiating table wouldn’t just dent diplomacy—it would strip the gloss off recent market optimism, yanking tariff risk back into the spotlight after a fleeting lull. Traders lulled into complacency may find themselves rethinking exposure—and quickly.

At the same time, wildfire-related disruptions stretching into June could tighten North American supply even further, draining inventories and luring in speculative capital. Against this backdrop, every US inventory report is being scrutinised, and OPEC+ rhetoric dissected word by word, for hints of a policy pivot. In a market this reactive, nuance doesn’t whisper—it moves barrels.

What It Means

For energy markets, today’s uptick in prices reflects more than just short-term noise—it illustrates the fragile balance of macroeconomic sentiment and physical supply risk. Investors with exposure to crude or oil-linked equities should prepare for continued volatility, particularly as environmental threats become a recurring supply-side variable. The resumption of US-China dialogue may offer temporary demand-side relief, but the deeper question is whether markets are underestimating the structural vulnerability of global supply chains in a climate-disrupted world. In that context, oil's mild gains this session may be less about optimism—and more about hedging against what comes next.