Oil prices edged higher on Thursday as investors remained cautious ahead of US President Donald Trump's meeting with Chinese President Xi Jinping in Beijing. By 0015 GMT, Brent crude futures were up 13 cents, or 0.12%, to $105.76 a barrel, while US West Texas Intermediate futures rose 12 cents, or 0.12%, to $101.14. The gains came after a weaker session on Wednesday, when both major contracts retreated as fears over potential US interest rate increases weighed on investor sentiment. Brent had dropped by more than $2 a barrel, while WTI declined by more than $1 in the previous session. Oil markets have stayed elevated since the outbreak of the Middle East conflict, with disruptions in the Strait of Hormuz continuing for 75 days. According to The Economic Times, crude prices are still below the highs reached in 2022 after Russia's invasion of Ukraine, despite disruptions impacting nearly 1 billion barrels of oil supply. At 7:34 am IST on Thursday, Brent crude was trading 0.03% lower at $105.61 per barrel, while WTI crude was trading 0.01% higher at $101.03 per barrel as of the latest market data.
US President Donald Trump arrived in Beijing on Wednesday evening, a day after saying he did not think he would need China's help to end the war, even as prospects for a lasting peace deal weakened and Tehran tightened its grip over the Strait of Hormuz. Trump is scheduled to meet Xi on Thursday and Friday and is expected to discuss Iran among other topics. According to Business Standard, while Trump has said he did not think he would need China's help to end the war, the president is nonetheless expected to ask Xi for assistance in resolving the costly and unpopular conflict. However, analysts said he is unlikely to get the support he wants. The visit comes at a critical geopolitical moment, with Trump urging China to use its influence over Iran to encourage negotiations and ease tensions around the Strait of Hormuz, a vital artery for global crude shipments. Trump is set to hold multiple discussions with Xi focused on securing economic outcomes, sustaining a delicate trade truce and handling contentious matters such as the Iran war and US arms sales to Taiwan. As per The Economic Times, China remains the largest buyer of Iranian crude despite sanctions, with more than 80% of Iran's oil shipments in 2025 headed to China, with independent Chinese refiners continuing to purchase discounted sanctioned crude. A CNN report suggests that Trump is also expected to push China's ally Iran to open the Strait of Hormuz as the two nations keep up their negotiations after repeated unyielding talks and failed proposals.
The war's impact on energy markets continues to intensify as the Strait of Hormuz, which normally handles one fifth of the world's supplies of oil and liquefied natural gas, remains closed. According to the Energy Information Administration, flows of crude and fuels through the crucial Strait of Hormuz fell by nearly 6 million barrels a day in the first quarter after hostilities began in late February, with only a trickle of tankers able to exit the Persian Gulf during the war. The International Energy Agency reports that the war has driven global oil inventories down at a record pace, and the market will remain 'severely undersupplied' until October even if the conflict ends next month. Saudi Aramco CEO Amin Nasser said on Monday that disruptions to shipments through Hormuz could delay stability returning to oil markets until 2027, potentially affecting around 100 million barrels of oil supply every week. Nuvama Institutional Equities said an extended shutdown of the Strait of Hormuz could disrupt nearly 20 million barrels per day of global crude flows, with the brokerage estimating oil prices could climb to between $110 and $150 per barrel in such a scenario. Failure to make meaningful progress on reopening the strait could leave the US with few options other than renewed military action, according to IG analyst Tony Sycamore cited by Business Standard.
Despite US-Israeli bombardment until the ceasefire, Iran has operational access to 30 of its 33 missile sites along the Hormuz strait and has retained roughly 70% of its prewar missile stockpile, according to new US intelligence assessments reported by Business Standard. Tehran continues to resist US demands to reopen Hormuz and says it will only do that if Washington ends a naval blockade on Iranian ports. The country is also insisting that the US unfreeze billions of dollars of Iranian assets and lift sanctions. A ceasefire between the US and Iran has lasted over a month but is fragile, with Iranian officials rejecting diplomatic proposals outright, demanding reparations, and declaring Iran's enrichment programme non-negotiable. Iran's Foreign Minister Abbas Araqchi said on Wednesday that Kuwait had 'unlawfully' attacked an Iranian boat and detained four Iranian citizens in the Gulf, adding that Tehran demands their release and reserves the right to respond. According to Haitong Futures, the brokerage warned that the ceasefire may only be temporary and stalled negotiations between Washington and Tehran could trigger another escalation, pushing oil prices even higher. With the absence of any relief or positive cues from West Asia, oil prices have surged nearly 7% in the last one week period amid the heightened risk of an escalation of the US-Iran conflict.
OPEC on Wednesday lowered its forecast for world oil demand growth in 2026, while the International Energy Agency said global oil supply would not meet total demand this year as the war wreaks havoc on Middle East production. According to Reuters, U.S. crude stocks fell by 4.3 million barrels last week, compared with analysts' expectations in a Reuters poll for a 2.1-million-barrel draw, with gasoline stocks falling by 4.1 million barrels and distillate stockpiles rising by 0.2 million barrels. U.S. Vice President JD Vance said he believes progress is being made in negotiations with Iran to end hostilities, after Trump rejected Tehran's latest proposal as unacceptable. Rystad analyst Janiv Shah said there is likely to be some structural tightness for at least the balance of this year, with prices potentially remaining above $100 per barrel even if the strait reopens due to logistical constraints. Morgan Stanley analysts said the global oil market is now in 'a race against time,' warning that the factors limiting a sharper rise in crude prices may weaken if the Strait of Hormuz stays shut into June. The brokerage added that higher U.S. crude exports and softer Chinese imports have so far helped shield the market from a deeper supply shock, but warned that a prolonged closure could once again tighten global supplies if disruptions continue beyond what either China or the United States can manage comfortably.
