U.S. stock markets rallied on Wednesday, with the S&P 500 climbing nearly 2%, as investor optimism grew over a potential easing of trade tensions with China. The surge followed comments from President Donald Trump and a Reuters report suggesting that talks between Washington and Beijing could lead to significant tariff reductions.
Speaking on Tuesday, Trump said tariffs on Chinese goods “will come down substantially, but it won’t be zero,” echoing earlier comments from Treasury Secretary Scott Bessent. Less than 24 hours later, Reuters reported that the White House is considering lowering tariffs on Chinese imports from 145% to as low as 50%, depending on the outcome of negotiations.
While equity markets responded positively to the news, oil markets did not share the same enthusiasm. By 2:25 p.m. ET on Wednesday, Brent crude for June delivery had dropped 2.2%, gaining back only a small fraction on the tariff optimism.
Commodity analysts at Standard Chartered noted on Tuesday that the ongoing uncertainty around tariffs has created anxiety in oil markets. This has weighed on demand expectations and driven volatility higher. The 30-day realized annualized volatility for front-month contracts hit 42.8% at the April 21 settlement—up more than 23 percentage points since the start of the month and just below a 30-month high.
Standard Chartered added that oil prices might rebound through a short-covering rally. The analysts pointed to a record wave of net-selling across the main Brent and WTI contracts following the April 2 tariff announcement. Long positions dropped by 26.3 million barrels, while short positions increased by 5.8 million barrels. The ICE Brent positioning index fell by 28.9 points week-on-week to -40.3, and the NYMEX WTI index rose by 21.0 to -79.0.
Meanwhile, oil markets seemed to overlook a recent bullish move from OPEC+. Last week, several key members—including Saudi Arabia, Russia, and Iraq—submitted plans to reduce their production as part of a new compensation framework. The group now plans to cut a total of 369,000 barrels per day each month from April 2025 through June 2026. This is a steeper cut than the previous range of 189,000 to 435,000 barrels per day.
However, Kazakhstan signaled resistance to the plan. On Wednesday, its government stated it would prioritize national interests over OPEC quotas and would produce oil at its own discretion, adding further uncertainty to the group’s coordinated efforts.
While markets welcome potential trade relief, oil prices remain caught between geopolitical friction and fluctuating expectations around global supply and demand.
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