Oil prices stay steady—but big moves may be coming

Dubai: Oil markets are playing it cool—for now. Brent crude is holding above $66 a barrel after a solid 4% weekly gain, and much of that optimism comes from renewed hopes of progress in US-China trade talks. But don’t be fooled: this calm could be short-lived.

As the world’s two biggest economies prepare for fresh discussions in London, traders are watching closely. A resolution could ease market jitters that have been weighing on oil for much of this year. But under the surface, deeper forces are building—and they may push prices in surprising directions.

Let’s start with the good news. Talks between Washington and Beijing have investors feeling cautiously optimistic. Add to that the annual summer surge in oil use—think road trips, flights, and air conditioning—and there’s reason for prices to stay supported, at least for now.

"The spot market signals remain relentlessly bullish,” said SEB analyst Bjarne Schieldrop. “It’s hard to stay bearish with peak demand season approaching.” That’s showing up in the numbers: US oil futures are priced higher for immediate delivery than for future months—often a sign of tight supplies.

Longer-term, things look less rosy. According to a new report from S&P Global Commodity Insights, global oil demand is expected to grow just 770,000 barrels per day (b/d) in 2025—making it one of the weakest years for demand growth in decades, outside of recessions or pandemics.

Meanwhile, supply is ramping up fast. Thanks to recent decisions by OPEC+ to relax output cuts, global production is set to rise by 2.2 million b/d in the second half of 2025. That’s almost triple the pace of demand growth.

And here’s where it gets even more interesting: the United States, which has been the engine of global supply growth in recent years, is expected to see a sharp slowdown.

By 2026, US oil output could fall by 640,000 b/d from mid-2025 levels. That’s a big shift—and it’s mostly because American shale producers tend to cut back fast when prices fall. Unlike other producers like Brazil or Canada, US companies are more sensitive to market signals and investor pressure.

“In a lower price environment, U.S. operators are likely to reduce upstream spending,” said S&P’s Jim Burkhard. “This could bring growth to a crawl by year-end, with the biggest production hits coming in 2026.”

All of this means the oil market is heading into a complicated second half of the year. On the surface, prices may continue to hold steady thanks to summer demand and geopolitical optimism. But underneath, an oversupply is brewing—and that could eventually push prices down.

S&P now expects Brent crude to range from the mid-$60s to even below $50 at times. If that happens, it might shake investor confidence—at least until declining US output eventually tightens the market again.

For now, oil prices are getting a summer boost. But unless global demand surprises to the upside—or OPEC+ reverses course on production—markets may face more downside risk than upside. Keep an eye on US production trends, trade talks, and inflation data. The second half of the year could look very different from the first.