Oil edges up as markets await Trump-Xi trade talks, Seoul hits record on AI boom

Oil prices edged higher on Friday as Asian markets traded in a narrow range, with investors awaiting tangible results from the Trump-Xi summit in Beijing. Seoul's KOSPI index hit a new record high, fueled by a boom in AI-related stocks. The modest uptick in crude came despite persistent uncertainty over global demand, as traders weighed the potential for a thaw in US-China trade relations against the reality of ample supply from OPEC+ producers, who hold significant spare capacity that could quickly offset any disruption. The Brent-WTI spread remained stable near $4 a barrel, reflecting balanced flows between the two benchmarks.

The White House confirmed that the two leaders agreed on the importance of keeping the Strait of Hormuz open for the free flow of energy, a key concern for oil markets. US Treasury Secretary Bessent noted that the world's two AI superpowers are beginning to engage in dialogue, adding a layer of optimism to the trade talks. However, markets remain cautious as the discussions on trade, geopolitics, and AI are expected to continue. The focus on the Strait of Hormuz underscores the vulnerability of global crude supply, with about 20 million barrels per day passing through the chokepoint. Meanwhile, US Strategic Petroleum Reserve levels remain near 40-year lows, limiting Washington's ability to intervene in case of a supply shock. Crack spreads for gasoline and diesel have narrowed recently, suggesting that refinery margins are under pressure from weak demand and rising product inventories.

For energy traders, the outcome of the summit is critical. Any signs of easing trade tensions could boost demand expectations, particularly from China, the world's top crude importer, where marginal demand growth has slowed in recent months. A focus on maintaining open shipping lanes supports supply stability, while Saudi-Russia coordination within OPEC+ continues to underpin prices through production quotas. The AI-driven rally in Seoul highlights the broader risk-on sentiment that could spill over into commodities, potentially lifting crude futures if the summit yields concrete progress. Traders can check NowPrice's fuel page for real-time pricing on crude and refined products. Looking ahead, markets will watch for concrete announcements from the summit, as well as any shifts in US-China energy policy that could impact global supply and demand balances. The structure of the futures curve, currently in mild backwardation, suggests near-term tightness but traders should monitor for any shift into contango, which would signal oversupply.