Oil Stabilizes as Trump and Xi Summit Begins Amid Stalemate in Iran War

SadaNews - Oil prices stabilized as a meeting commenced between U.S. President Donald Trump and his Chinese counterpart Xi Jinping, amid the Iran war that shows no signs of a near resolution.

Brent crude traded around $106 per barrel after a 2% decline in the previous session, while West Texas Intermediate remained steady near $101.

Trump stated in his opening remarks in Beijing following the reception ceremony, "The relationship between China and the United States will be better than ever."

At the same time, the war has pushed global oil inventories down at a record pace, and the market will continue to suffer from a "severe supply shortage" until October, even if the conflict ends next month, according to the International Energy Agency. Before the Trump-Xi summit, the United States threatened banks and imposed sanctions on additional entities for selling Iranian oil to China, its largest buyer.

Hormuz Remains the Center of Supply Disruption

Crude and fuel flows through the vital Strait of Hormuz declined by about 6 million barrels per day in the first quarter after hostilities began in late February, according to the Energy Information Administration. Only a handful of tankers managed to leave the waters of the Arabian Gulf during the war.

Rebecca Babin, senior energy trader at CIBC Private Wealth Group, said, "As long as the trajectory still seems tilted towards diplomacy rather than outright escalation, the market remains focused on the endpoint, which is when flows will eventually resume, even as that timeline continues to be delayed."

A ceasefire has held since early April, despite a series of escalations, but the U.S. and Iran appear to be making little progress towards resolving their disputes and agreeing on a peace proposal. This has effectively kept the strait closed, choking vital energy supplies to global customers.

End of Sanctions Exemption Pressures India

Iranian crude shipments have also been constrained due to a U.S. maritime blockade on the country's ports. Photographs captured by satellite, as reported by Bloomberg News, showed that the oil docks at the primary export terminal on Kharg Island were once again empty on Tuesday. For the fourth consecutive time satellites have detected activity at the facility, no tankers were observed.

This week, an exemption from sanctions issued by the United States, which permitted the purchase of Russian oil aboard tankers in the water, is set to expire, leaving refineries in India, one of the largest buyers, particularly vulnerable. The South Asian nation has imported massive quantities so far this month.

In the latest trading, Brent crude futures for July delivery rose 0.3% to $105.98 per barrel as of 10:50 AM Singapore time. West Texas Intermediate for June delivery climbed 0.4% to $101.45 per barrel.