Trump, China Restart Trade Talks: On Thursday, U.S. President Donald Trump and Chinese President Xi Jinping held their first call since Trump’s return to office, reopening high-level trade discussions. Both leaders emphasized the need to stabilize relations, with Xi urging the U.S. to lift tariffs and ease tech and visa restrictions. Trump called the conversation “very positive,” though concerns remain over unresolved issues like Taiwan and rare earth exports. Despite a 90-day tariff truce, the call highlights continued uncertainty surrounding the broader U.S.-China trade war.

Slower Job Growth Amid Tariff Uncertainty:  U.S. job growth likely slowed in May, with payrolls expected to rise by around 130,000, down from April's 177,000, as businesses face planning challenges tied to shifting tariff policies and political uncertainty. The unemployment rate is forecast to hold steady at 4.2%, with solid wage growth supporting consumer spending. Despite dimming economic prospects, firms are avoiding layoffs, favoring a low-hiring, low-layoff approach that may keep the Federal Reserve from cutting interest rates until late 2025. Sectors like manufacturing and hospitality are seeing headwinds from trade tensions and tariffs, while immigration crackdowns are having a limited but growing impact on labor participation.

Light Crude Faces Pressure: Rising OPEC+ output and increased global supply from countries like Brazil, Guyana, and Kazakhstan are reducing demand for U.S. light, sweet crude, pressuring prices and export volumes. U.S. crude exports to Europe and Asia are declining as refiners shift toward cheaper medium-sour barrels better suited for summer fuel production. Prices for key U.S. grades like WTI-Midland and Light Louisiana Sweet have dropped significantly since March. Amid uncertain economic conditions and shifting global trade dynamics, U.S. producers face a tough outlook, with some considering output cuts despite political pressure to maintain domestic supply.

Market Overview: Oil prices are down Friday morning, but WTI is on track for a 3 percent weekly gain, its first in three weeks, thanks to renewed optimism after Thursday’s call between Presidents Trump and Xi. The positive tone of the U.S. China trade talks raised hopes for stronger economic growth and energy demand. However, growing global supply remains a headwind, with OPEC Plus increasing output and Saudi Arabia cutting prices to maintain market share. Analysts expect the market to stay balanced through summer, but a potential surplus could emerge in the fourth quarter.

ECB trims back Interest Rates

The European Central Bank cut rates to 2% on Thursday, its eighth cut in a year, but signaled a likely pause ahead, saying it’s in a “good place” to handle global uncertainty. Markets reacted strongly, with the euro hitting a six-week high and two-year bond yields jumping. This shift suggests the ECB’s aggressive easing cycle is nearly done, helping stabilize inflation expectations. The eurozone now joins Japan and Switzerland as the only G10 central banks below 2%, while the U.S. and UK remain above 5%. A stronger euro could boost commodity buying power and ease inflation pressure from imports. For energy markets, the pause signals less downward macro pressure, offering modest support to oil prices. 

Oil prices rose more than $1 per barrel on Friday and were set for their first weekly gain in three weeks, supported by a favorable U.S. jobs report and renewed trade talks between President Trump and President Xi. West Texas Intermediate (WTI) crude climbed $1.34, or 2.11%, to $64.71, which signaled a 4.9% increase for the week. The U.S. employment data showed steady unemployment and moderate job growth, fueling expectations of a Federal Reserve interest rate cut that could boost oil demand. Trade negotiations between the U.S. and China ,as well as continuing talks with Canada, contributed to market optimism amid global economic uncertainty. Meanwhile, OPEC+ plans to increase output in July are expected to be offset by higher summer demand, with analysts warning of potential price risks from geopolitical tensions and sanctions.