Oil Price Outlook Weakens On OPEC+ Hikes, Lingering Trade Concerns

Economic

Commodity

Summary:

Analysts have revised down their oil price forecasts for the third consecutive month as swelling OPEC+ supply and lingering uncertainty around the impact of trade disputes on fuel demand weigh on prices, a Reuters poll showed.

A survey of 40 economists and analysts in May forecasts Brent crude will average $66.98 per barrel in 2025, down from April's $68.98 forecast, while U.S. crude is seen at $63.35, below last month's $65.08 estimate. Prices have averaged roughly $71.08 and $67.56 so far this year respectively, as per LSEG data.

While tensions have somewhat eased between the U.S. and other trade partners, trade conflicts still loom as a key factor that could weaken oil demand, said Tobias Keller, analyst at UniCredit.

"On the supply side, oil prices will be heavily influenced by OPEC+ production decisions, while geopolitical tensions... pose ongoing risks of disruption and price volatility," Keller added.

Eight OPEC+ members began unwinding output cuts earlier this year, agreeing to larger-than-expected increases of 411,000 bpd for May and June. The members may decide on a similar output hike for July at a meeting on Saturday, sources have told Reuters.

The move "seems driven by a desire to punish non-compliant members rather than support oil prices at any specific level. Compliance will be hard to enforce, especially in Kazakhstan," said Suvro Sarkar, lead energy analyst at DBS Bank.

Meanwhile, analysts polled by Reuters expect global oil demand to grow by an average of 775,000 barrels per day in 2025, with many pointing to elevated trade uncertainty and the risk of economic slowdown as key concerns. This compares to the 740,000 bpd 2025 average demand growth forecast from the International Energy Agency earlier this month.

With U.S. consumption and China oil demand constrained by fuel efficiency gains, economic uncertainty and the shift to electric mobility, "demand growth is largely coming from the resource nations themselves," said Norbert Ruecker, head of economics & next generation research at Julius Baer.

Meanwhile, Russia's war in Ukraine continues to pose a geopolitical risk premium for oil. Analysts say markets have largely priced in the uncertainty.

"Potential de-escalation efforts and the possibility of lifting sanctions on Russian oil could further lower prices," said Sarkar.

Source: Yahoo Finance

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Thomas

Economic

Commodity

The driving season in the US officially began Monday with the Memorial Day weekend. The initial data show more Americans hit the road compared with last year, a good sign for gasoline demand and the companies that make the fuel.

Consumption over the three-day period was up as much as 2% from the same weekend last year, according to GasBuddy, a firm that tracks fuel prices.

In anticipation of a big driving weekend, gas stations filled up their underground tanks, with gasoline demand averaging 9.5 million barrels a day in the week ending May 23, a seven-year seasonal high.

That’s a good incentive for US refiners to raise production into the peak months for demand, which is when they make the bulk of their money. Their margins are about $1 a barrel higher than last year, while they’re currently processing about 750,000 barrels a day of crude less.

“Refineries have a lot of room to run hard,” GasBuddy’s Head of Petroleum Analysis Patrick De Haan said in an interview.

To be sure, there’s plenty of economic uncertainty heading into the summer. The US economy contracted slightly during the first quarter, with consumer spending growth at its weakest pace in almost two years.

Households may end up deferring summer travel decisions or waiting for last-minute deals, which could see a swing to air travel late in the season.

But at least for now, economic anxiety is manifesting in a preference for driving over flying, according to reports from both the American Automobile Association and Bank of America Corp. released prior to Memorial Day.

Cheaper prices at the pump are a major factor driving the rise in demand, De Haan said. Average nationwide gasoline prices on Memorial Day were $3.17 a gallon, 41 cents less than last year, according to AAA figures.

Even those who are nervous about the economy and employment are getting in their cars, he said.

Tankers involved in a vital hub of the Iran-to-China oil trade are disappearing from digital tracking systems as the threat of US sanctions forces tactical changes to keep crude flowing. Over recent months, more vessels have started switching off their transponders as they near waters off eastern Malaysia, a hotspot for the transfer of Iranian oil from one to ship to another for transport to China. Previously, systems were rarely disabled, signaling when tankers anchored next to each other.

The condition of one of the world’s most important copper mines remains clouded in uncertainty, more than a week after seismic activity caused widespread flooding deep below ground.

Oil is on track for a marginal weekly decline ahead of an OPEC+ meeting on output policy that’s expected to lead to another supply hike.

Spain’s grid operator and the country’s largest utility took to public finger-wagging over their roles during the recent blackout.

Japan’s largest liquefied natural gas importer, Jera Co., signaled it would consider buying the fuel from an export project in Alaska that has been championed by US President Donald Trump.

A golden share giving Washington veto rights on major decisions may be the key to Nippon Steel Corp.’s $14.1 billion deal for US Steel Corp. But the Japanese firm may come to regret its generosity, Bloomberg Opinion columnist Gearoid Reidy writes.

Heat pump sales rose globally by 6% in 2024, driven by strong growth in Asia and a rebound in the US, while Europe slowed sharply, according to BloombergNEF. Momentum now hinges on policy support and affordability. Top markets like China, Japan and the US lead on local capacity and the electrification push, while Europe’s dip may reverse, assisted by supportive long-term regulation. Canada and the UK posted the fastest growth, with shipments up over 53% and 64%, respectively.

Returning to London June 26, the Bloomberg Sustainable Business Summit will bring together leaders and investors to explore how sustainability efforts can bolster resilience and mitigate risk. Register here. The summit moves to Singapore July 30.

Source: Bloomberg Europe

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Damon

Cryptocurrency

Tax cuts have consistently been a cornerstone of Donald Trump's political agenda. His first administration helped pass the Tax Cuts and Jobs Act, often referred to as the Trump tax cuts. Now, he is pushing for Congress to pass the One Big Beautiful Bill Act.

Thus far, the House of Representatives has passed the bill, which now awaits a Senate vote, which could be tight. Interestingly, Bitcoin (BTC -2.74%) has surged to new all-time highs while this all plays out.

Is Bitcoin's hot momentum a coincidence or something investors should pursue?

More importantly, what might it say about Bitcoin's investment prospects? I broke everything down for you below.

Image source: Getty Images.

What exactly is in the One Big Beautiful Bill Act?

It probably shouldn't surprise anyone in today's divisive political landscape that the One Big Beautiful Bill Act has garnered controversy. The bill includes efforts to deliver on some of Trump's key campaign promises.

Among other things, the bill would make the tax cuts enacted by the Tax Cuts and Jobs Act permanent and temporarily suspend federal taxes on tips and overtime through 2028. The bill also tightens restrictions on Medicaid and food stamps, core entitlement programs.

But most relevant to this discussion is that the bill would raise the U.S. debt ceiling by $4 trillion from its current $36.1 trillion, a roughly 11% increase.

Bitcoin isn't sending a message; it's responding to one

Regardless of whether you support the bill, it marks a notable shift in the administration's political tone toward addressing fiscal deficits and the national debt.

Elon Musk collaborated with Trump to establish the Department of Government Efficiency (DOGE), which sparked controversy due to the group's aggressive approach to targeting various government departments to identify and recommend cost cuts to Trump and Congress.

But the wheels have essentially fallen off that project. Musk has made it clear that he will be devoting most of his time and energy to Tesla, SpaceX, and his other companies from now on. Additionally, Republican lawmakers have rejected most of DOGE's recommendations. In other words, not much is changing for a government that has spent more than it brings in for more than two decades now.

The One Big Beautiful Bill punctuates that tone with an exclamation point. The Committee for a Responsible Federal Budget estimates that the bill, or a version similar to it, would:

Reduce federal revenue by between $5 trillion and $11.2 trillion during the next decade.
Lower revenue by 1% to 3% of gross domestic product (GDP).
Boost debt from about 100% of GDP today (118% under current law) to between 132% and 149% by 2035.

This isn't a party issue -- both political parties have operated the U.S. government at a fiscal deficit for years. The government appears determined to continue borrowing money, pumping more fiat currency into the global economy.

Bitcoin is an anti-inflationary asset, a valued digital asset with a fixed supply and a dollar-denominated price. Investors wary of the government's apparent failure to rein in its spending are preparing for continued inflation over the long term.

Should investors buy Bitcoin now?

It's worth noting that Bitcoin has historically been volatile and remains so. Bitcoin has no underlying value, such as a business with earnings. It's not a physical asset like gold. Bitcoin's price drops 20% or more on a fairly routine basis, so there's no need to rush into it. Instead, consider dollar-cost averaging.

You can either own Bitcoin directly or through a spot Bitcoin exchange-traded fund (ETF). And as always, Bitcoin should be a component in a well-diversified investment portfolio because nobody knows what the future holds.

If you do want to invest in Bitcoin, do so for the long term. As the U.S. dollar continues to erode under fiscal deficits, investors may continue to seek alternative assets, such as Bitcoin. It's not a guarantee, but Bitcoin has trended higher for more than a decade now. Until the government's spending habits change, that may continue.

Source: The Motley Fool

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Manuel

Commodity

Political

U.S. President Donald Trump on Friday said he planned to increase tariffs on foreign imports of steel from 25% to 50%, ratcheting up pressure on global steel producers and vowing to deepen his trade war.

"We are going to be imposing a 25% increase. We're going to bring it from 25% to 50% the tariffs on steel into the United States of America, which will even further secure the steel industry in the United States," he said at a rally in Pennsylvania.

The levy increase will take effect next week.

The steel tariffs, along with levies on aluminum, were among the earliest put into effect by Trump when he returned to office in January. The tariffs of 25% on most steel and aluminum imported to the U.S. went into effect in March, and he had briefly threatened a 50% levy on Canadian steel but ultimately backed off.

Under the so-called Section 232 national security authority, the import taxes include both raw metals and derivative products as diverse as stainless steel sinks, gas ranges, air conditioner evaporator coils, horseshoes, aluminum fry pans and steel door hinges.

The total 2024 import value for the 289 product categories came to $147.3 billion with nearly two-thirds aluminum and one-third steel, according to Census Bureau data retrieved through the U.S. International Trade Commission's Data Web system.

By contrast, Trump's first two rounds of punitive tariffs on Chinese industrial goods in 2018 during his first term totaled $50 billion in annual import value.

Source: Reuters

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Manuel

China–U.S. Trade War

Economic

The lengthy meeting underscores the continued importance of trade negotiations between two major world economies. The Japanese delegation maintains a firm stance on the removal of high US tariffs on essential goods like cars and steel.

US-Japan Trade Relations

The meeting led by Ryosei Akazawa, a key figure in Japan's economic policy, involved discussions on trade deficits. Purchases of US defense equipment were mentioned as a potential avenue to reduce trade imbalances, though without clear commitments.

While no direct impact on cryptocurrencies was reported, the discussions focused heavily on traditional tariffs on Japanese exports. Japan's refusal to bend on demands mirrors past negotiation patterns, indicating ongoing trade tensions.

Economic and Geopolitical Implications

The talks highlighted Japan's separation of defense and trade procurement decisions. Official statements emphasized that economic stances remain unchanged, potentially affecting broader geopolitical balances and trade agreements.

Prior trade discussions between the US and Japan have primarily centered around material goods. Current tariffs might disrupt industries but show limited immediate ripple effects on the financial or cryptocurrency sectors, pending further developments.

The meeting outlined potential outcomes with Ryosei Akazawa's continued participation alongside Scott Bessent's vigilance. Ongoing dialogues hint at future policy shifts which could eventually alter trade balances and impact economic relationships, though not immediately.

Source: Reuters

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Manuel

Economic

Forex

A few days of gains for the US dollar this week wasn’t enough to reverse its broader declines as US trade and policy uncertainty weighs on sentiment.

A gauge of dollar strength fell about 0.6% in May, making it the longest monthly losing streak in five years. Investors also became increasingly bearish on the greenback as some turned their focus to a proposed US measure that would hit companies from countries deemed to have “discriminatory” tax policies.

“If the bill as presently written takes effect, it would deter foreign investment in US assets at a time when the country faces increasing reliance on foreign capital to finance its ballooning debt,” wrote Elias Haddad, a strategist at Brown Brothers Harriman & Co. in a note. “Clearly, this is not good for the dollar.”

Hedge funds, asset managers and other speculative traders boosted their bets tied to the dollar’s decline to $13.3 billion for the week through May 27, up from $12.4 billion the week prior, according to data by the Commodity Futures Trading Commission released on Friday.

Concern that President Donald Trump’s erratic trade policies will undermine the economy are adding to the greenback’s weakness and eroding its appeal as a traditional haven bet. A court battle is underway over the legality of Trump’s sweeping tariffs — though the US administration insists they’re here to stay.

The Bloomberg Dollar Spot Index ended Friday up 0.1% as reports showed US consumers hitting the brakes on spending in April while goods imports plummeted by a record as companies adjusted to higher tariffs. US consumer sentiment rebounded in late May, according to the University of Michigan.

The latest data is “still insufficient for the Federal Reserve to seriously consider its cuts,” said Yusuke Miyairi, a foreign-exchange strategist at Nomura. “Choppy price action in the dollar continues, owing to the market following back-and-forth tariff headlines.”

Trump accused China of violating an agreement with the US to ease tariffs, intensifying tensions between the world’s two largest economies again.

Meanwhile, a gauge of emerging-market currencies is on track for its first weekly loss since mid-April as investors scale back on risk following recent gains. The South African rand slumped 1% against the dollar on Friday.

While currencies including the rand and Mexico’s peso have strengthened more than 4% against the greenback since Trump unveiled his comprehensive list of tariffs, traders are taking some profits amid renewed global trade noise.

Investors “are bringing back some USD bids” ahead of the weekend, said Alejandro Cuadrado, head of global FX and Latin America strategy at Banco Bilbao Vizcaya Argentaria SA in New York. “As we approach new tariff deadlines we could see some uptick in volatility from very low levels, particularly in Latin America.”

“What we’re waiting to see next is whether the dollar decline begins to reassert itself,” said Paul Mackel, global head of currency research at HSBC Holdings Plc. “So what can drive that? Front and center it will be related to what’s happening with the US economy.”

Source : Bloomberg

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Manuel

Commodity

Oil edged down after a choppy session as traders parsed mixed messaging on the status of trade talks between the US and China.

West Texas Intermediate futures swung in a roughly $2 range before settling down fractionally near $61 a barrel. Futures had sunk after US President Donald Trump said China had violated its trade agreement and threatened to broaden restrictions on its tech sector, reviving concerns that a tariff war between the world’s two largest economies would hurt oil demand. Crude later pared losses when Trump signaled openness to speaking with Chinese President Xi Jinping.

Meanwhile, OPEC+ was said to consider an output increase of more than 411,000 barrels a day in July in a push for market share. The revival of idled output by OPEC and its allies at a faster-than-expected pace has bolstered expectations that a glut will form this year.

“Global oil market fundamentals remain somewhat loose now and should loosen up much more later this year, with growing non-OPEC supply and relatively mild, but persistent stock builds,” Citigroup analysts including Francesco Martoccia said in a note. Geopolitical risks from Russia to Iran continue to provide price support against an otherwise softening physical backdrop, they added.

Meanwhile, commodity trading advisers, which tend to exacerbate price swings, increased short positions to sit at 91% short in Brent on Friday, compared with roughly 70% short on May 29, according to data from Bridgeton Research Group.

Still, some metrics are pointing to near-term strength in the oil market. WTI’s front-month futures were trading about 93 cents more per barrel than the contract for the next month, the biggest premium since early January.

Libya’s eastern government threatened to curb oil production and exports in protest after a militia stormed the state oil company’s headquarters. A shutdown could result in a loss of as much as 600,000 barrels a day for a month, according to Citi. Further supporting prices, wildfires are putting about 9% of Canada’s crude output at risk as a blaze in Alberta’s oil sands region spreads.