By Giulia Petroni

Here is a look at what happened in oil markets in the week of June 2-6 and what the focus will be in the days to come.

OVERVIEW: Oil prices are on track for a significant weekly gain, fueled by renewed optimism surrounding trade talks after President Trump and Chinese leader Xi Jinping agreed to resume negotiations. Brent crude, the international oil benchmark, trades around $66 a barrel, while the U.S. oil gauge West Texas Intermediate is above $64 a barrel. Both contracts have risen by around 6% this week, even though the specter of OPEC+ supply continues to hang on the market.

MACRO: The latest U.S. jobs data on Friday prompted traders to scale back bets the Federal Reserve will cut interest rates this year. While job growth slowed slightly last month--signaling employers are cautious about hiring due to persistent uncertainty over tariffs and the economic outlook--it was still above expectations.

Meanwhile, the U.S. dollar recovered after hitting a six-week low against a basket of currencies on Thursday following soft economic data and signals from the European Central Bank that it is nearing the end of its rate cuts.

All eyes are now on Trump's tax-and-spending bill, currently before the Senate and at the center of a public dispute between the President and Elon Musk.

GEOPOLITICAL RISKS: Tensions between the U.S. and China, the world's two largest economies, have eased slightly after Trump described his recent conversation with Xi as productive and said that both sides agreed to meet soon. While uncertainty around the future of trade talks remains high, this latest development improved market sentiment and lifted oil demand prospects.

Meanwhile, geopolitical tensions remain high.

Russia launched a missile and drone attack on Ukraine after Kyiv's surprise strike on the Kremlin's bomber fleet, with Trump's efforts to broker a cease-fire between the two countries appearing to be losing steam. At the same time, Iran ordered thousands of tons of ballistic-missile ingredients from China even as it continues negotiations with the U.S. over the future of its nuclear program.

SUPPLY AND DEMAND: Concerns over a large oversupply continue to weigh on market sentiment. Analysts now expect OPEC+ members to agree to another large output hike for August--and possibly September--as the group looks to regain market share and crack down on overproduction.

"This would likely result in an even greater supply surplus than already expected for the second half of the year," analysts at Commerzbank Research said. "We therefore consider the upside potential for oil prices to be exhausted."

This week, Saudi Arabia lowered its official selling price for July loadings of its flagship Arab Light to Asia, though the reduction was smaller than market participants had anticipated. "The small price cut is a positive sign for oil demand, especially as Saudi Arabia is likely to significantly increase oil deliveries in July due to the decision to expand oil production," the analysts said.

Meanwhile, data from the Energy Information Administration revealed U.S. crude inventories fell last week, but gasoline and fuel stocks rose more than expected, indicating weak demand in the world's top oil consumer.

WHAT'S AHEAD: The EIA is set to release its monthly energy market report next week, followed by updates from OPEC and the International Energy Agency the week after. The reports will be closely watched for fresh insights into global supply-and-demand dynamics, inventory trends and pricing outlooks.

China's upcoming foreign trade figures will also be in focus, as investors assess the strength of demand in the world's largest crude importer.

On the macroeconomic front, attention will turn to U.S. inflation data, with the Consumer Price Index due Wednesday and the Producer Price Index on Thursday. These releases are expected to offer key signals on inflationary pressures and the broader economic outlook, especially following a series of recent growth downgrades by major institutions. The data could also influence expectations around Fed policy heading into the second half of the year.

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

(END) Dow Jones Newswires

June 06, 2025 11:43 ET (15:43 GMT)

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