Oil prices surged nearly 3% in one day due to optimism surrounding US-China trade talks, with both Brent crude and WTI crude rising.
On May 8, 2025, international oil prices rose nearly 3% due to the upcoming trade talks set to take place between the US and China in Geneva, Switzerland. US Treasury Secretary Scott Besant and Chinese Vice Premier He Lifeng will meet on May 10 in an effort to ease tariff tensions. The pressure from OPEC+ to boost production, the announcement of a US-UK trade agreement, and US sanctions against Chinese refineries all contribute to oil price fluctuations.
Key Updates
05/08 22:00
Oil prices surged nearly 3% in one day due to optimism surrounding US-China trade talks, with both Brent crude and WTI crude rising.
On May 8, 2025, international oil prices rose nearly 3% due to the upcoming trade talks set to take place between the US and China in Geneva, Switzerland. US Treasury Secretary Scott Besant and Chinese Vice Premier He Lifeng will meet on May 10 in an effort to ease tariff tensions. The pressure from OPEC+ to boost production, the announcement of a US-UK trade agreement, and US sanctions against Chinese refineries all contribute to oil price fluctuations.
U.S.-China Trade Talks Resume, Market Sentiment Warms
According to multiple media reports, the United States and China will hold a new round of trade talks in Geneva, Switzerland, on May 10. U.S. Treasury Secretary Bessent and Trade Representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng. Bessent stated at a congressional hearing that the focus of this meeting is "de-escalation" rather than immediately reaching a comprehensive agreement. He emphasized, "We must first de-escalate tensions before we can move forward."
This news boosted market confidence, leading to a rise in oil prices. On May 8, Brent crude futures rose by $1.72 or 2.8%, closing at $62.84 per barrel; WTI crude futures increased by $1.84 or 3.2%, closing at $59.91 per barrel. SEB analyst Ole Hvalbye noted that expectations of a potential breakthrough in the talks provided support for the oil market.
OPEC+ Production Pressure and Supply Variables
Despite hopes for the U.S.-China talks, supply pressures persist. OPEC+ began gradually lifting previous production cut agreements in April and plans further increases in May and June. According to a Reuters survey, OPEC's actual production in April was 26.6 million barrels per day, down by 30,000 barrels from March, mainly due to a decline in Venezuelan exports affected by U.S. sanctions, with slight reductions in Iraq and Libya as well.
Citi's latest report pointed out that OPEC+'s planned production increase could pressure oil prices, lowering the three-month Brent crude price forecast from $60 to $55 per barrel. Nevertheless, the bank maintains its full-year average price expectation at $60 per barrel.
U.S.-UK Trade Agreement Announced, Market Observes Impact
In another trade development, U.S. President Trump and UK Prime Minister Keir Starmer announced a "landmark" trade agreement. Under the agreement, the UK will reduce its average tariff on U.S. goods from 5.1% to 1.8% and further open market access; the U.S. will maintain its 10% tariff policy on UK goods.
Although this agreement does not directly involve energy products, as the first major agreement under the Trump administration's foreign trade policy, its symbolic significance has boosted market confidence in potential progress in other trade negotiations, indirectly supporting oil prices.
U.S. Sanctions on Chinese Refineries, Impacting Iranian Oil Exports
The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) announced on May 8 sanctions against Hebei Xinhai Chemical Group Co., Ltd. and three port operators in Shandong, China, for their involvement in the purchase or facilitation of the transportation of Iranian crude oil. This marks the third round of U.S. sanctions targeting China's "teapot refineries" and the first against port operators.
According to the U.S. Treasury statement, these companies acquired billions of dollars' worth of Iranian oil through ship-to-ship (STS) transfers with Iran's "shadow fleet." The named vessels include "STAR TWINKLE 6," "LAMD," and "SKADI," all of which have repeatedly transported Iranian oil to China.
Treasury Secretary Bessent stated, "The U.S. will continue to increase pressure on Iran's oil supply chain to prevent its regime from using oil revenues to promote destabilizing actions." This move further restricts Iranian oil exports, potentially impacting global supply, especially as Chinese refineries seek alternative sources.
Tariff Premium Becomes New Driver of Oil Price Volatility
Analysts point out that as geopolitical risks stabilize, the main driver of oil price volatility has shifted from "geopolitical risk premium" to "tariff premium." Jim Ritterbusch, an analyst at Ritterbusch and Associates, stated, "The Trump administration's unpredictable policies have made market expectations of tariff policies the core source of oil price volatility."
This view is also reflected in recent sharp fluctuations in oil prices. On May 7, due to concerns about summer demand, WTI crude fell by $1.02 or 1.7%, closing at $58.07 per barrel; Brent crude fell by $1.03 or 1.7%, to $61.12 per barrel. Despite a 2 million barrel decrease in U.S. crude inventories, an unexpected increase of 200,000 barrels in gasoline inventories raised concerns about demand prospects.
