Oil prices decline as market eyes geopolitical shifts
Oil prices dropped slightly Monday morning as investors weighed ongoing geopolitical uncertainty and upcoming OPEC+ actions.
West Texas Intermediate fell to $64.20 early in London trading. It then rebounded slightly, settling 0.2% lower than Friday’s close.
Brent crude mirrored the dip, sliding 0.2% to hover near $66.33. This comes after last week’s rally.
That rally was driven by stronger-than-expected US non-farm payroll data. The economic signal temporarily lifted investor sentiment on oil.
Production gains lag despite OPEC+ output hikes
All eyes are now on OPEC+ as it evaluates production levels. So far, output increases remain mostly theoretical.
Morgan Stanley analysts noted a disconnect. Production quotas have risen by a million barrels per day since March.
However, actual oil output has not risen accordingly. Saudi Arabia, a key OPEC+ player, shows little change in production volume.
“Real supply remains stagnant despite expanded quotas,” wrote Morgan Stanley’s Martijn Rats in a recent report.
US-China trade talks fuel market speculation
Geopolitical negotiations between the US and China are also a key factor in oil market volatility this week.
Delegations from both nations meet Monday in London. High-level representatives from both sides aim to repair strained trade ties.
US Commerce Secretary Howard Lutnick will meet China’s Vice Premier He Lifeng. Energy, chips, and rare earth exports will be top topics.
Oil demand from both nations is substantial. Their trade relationship plays a critical role in setting global oil consumption patterns.
Pound rallies as US dollar weakens further
Currency markets also influenced oil sentiment. Sterling climbed 0.3% against the US dollar to $1.356 on Monday morning.
This recouped losses from last week when the pound retreated from a two-year high.
Year-to-date, the pound has gained 8.1%. Confidence in US economic leadership continues to erode due to Trump’s tariff policies.
The dollar index, tracking the greenback against major currencies, dropped 0.3% Monday and is down 8.8% for the year.
Rare earths and tech at the heart of trade talks
Energy isn’t the only item under discussion in the US-China talks. Technology access and rare earth exports are also in focus.
Beijing seeks continued access to US semiconductors. Washington eyes control over China’s dominance in rare earth supply chains.
These strategic commodities are essential for AI, EVs, and advanced military tech—areas closely tied to energy demand.
Any progress or conflict in these negotiations could ripple into oil markets, shifting expectations for industrial growth and demand.
Investors brace for volatile week in oil markets
With OPEC+ decisions pending and US-China talks underway, oil traders expect price swings in the days ahead.
A clear production increase or a surprise diplomatic development could significantly move the oil needle either way.
For now, oil remains under pressure as traders seek clarity. Economic data, political strategy, and global supply dynamics all converge.