By Giulia Petroni

Here is a look at what happened in oil markets in the week of May 19-23 and what the focus will be in the days to come.

OVERVIEW: Oil prices are broadly rangebound on Friday as traders weigh concerns over global trade tensions and the prospect of another super-sized output increase from OPEC+. Brent crude, the international oil benchmark, trades above $64 a barrel, while the U.S. oil gauge West Texas Intermediate is at around $61 a barrel. Both contracts fell 1% on Friday after President Trump threatened the EU with fresh tariffs, but recovered ground shortly after.

MACRO: Fears of escalating trade tensions resurfaced after Trump said in a Truth Social post that he is recommending a 50% tariff on goods from the EU starting on June 1, heightening concerns about global demand at a time when oil markets are already facing an oversupply.

At the same time, the U.S. fiscal deficit has come under renewed scrutiny after the House passed Trump's tax-and-spending bill, which includes a debt ceiling increase. The move has added to uncertainty around the economic outlook, particularly in the wake of Moody's recent credit rating downgrade.

Meanwhile, the future path of interest rates remains unclear, with Federal Reserve policymakers keeping interest rates steady as they monitor the impact of global tariffs and trade negotiations on inflation and the economy.

GEOPOLITICAL RISKS: Geopolitical developments have taken center stage this week.

U.S. and Iranian officials began a fifth round of nuclear negotiations in Rome, but the outcome remains uncertain as Washington insists Tehran can't continue to enrich uranium under a deal. A potential agreement could pave the way for easing U.S. sanctions on Iranian oil export, putting pressure on prices.

Meanwhile, CNN reported Israel could be preparing a strike against Iran--a move that could significantly disrupt Iranian oil flows and threaten broader regional supply. The report, citing unnamed officials, noted that Israeli leaders haven't made a decision yet.

In Eastern Europe, a major prisoner swap between Russia and Ukraine began Friday after talks in Istanbul and a call between Trump and Russian President Vladimir Putin failed to yield a breakthrough.

SUPPLY AND DEMAND: Oil prices came under pressure following OPEC+'s decision to accelerate output hikes in both May and June. Now, another setback might be on the horizon as key members of the alliance prepare to meet online next week.

Market watchers expect the cartel and its allies to make a third large output hike in July--a move widely interpreted as an effort to regain market share and pressure over-producing members by pushing prices lower. "The fact that Kazakhstan has apparently still not cut back its production speaks in favor of this," according to Commerzbank Research analysts.

Adding to bearish sentiment, the latest data from the Energy Information Administration showed U.S. crude oil inventories rose for a second consecutive week, sending a bearish signal about demand in the world's top oil consumer. Commercial crude oil stocks rose by 1.3 million barrels last week, against expectations of a 800,000-barrel decline. Gasoline and distillate fuel inventories also increased.

Meanwhile, crude oil processing in China remained weak in April, according to analysts, signaling that demand in the world's second-largest oil consumer continues to struggle.

WHAT'S AHEAD: The oil market is unlikely to stabilize anytime soon, with geopolitical developments expected to keep volatility high. Starting next week, attention will increasingly shift to U.S. fuel demand as the summer driving season kicks off with Memorial Day weekend. On the data front, traders will closely watch the release of the Federal Reserve's May FOMC meeting minutes on Wednesday, U.S. GDP figures on Thursday, and the PCE index on Friday.

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

May 23, 2025 10:59 ET (14:59 GMT)

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