Trump-Xi Beijing summit in focus as oil supply risks mount

US President Donald Trump and Chinese President Xi Jinping are meeting in Beijing for the first time since October, a high-stakes summit taking place against the backdrop of the Iran war, elevated oil prices, and a blockade along the Strait of Hormuz that is choking 20% of the world's oil supply. The blockade has already disrupted crude flows, and the meeting's outcome will be closely watched by energy markets. With Brent crude trading at elevated levels and the Brent-WTI spread widening due to supply concerns, traders are assessing the potential for further disruptions. OPEC+ spare capacity, largely held by Saudi Arabia and the UAE, remains a key buffer, but any coordinated response with Russia could influence production levels. The US Strategic Petroleum Reserve (SPR) stands at around 370 million barrels, providing a cushion against supply shocks, but the blockade's persistence could test its limits.

The outcome of the meeting carries significant implications for global energy markets. The Strait of Hormuz blockade has already disrupted crude flows, and any deterioration in US-China relations could further destabilize supply chains. For oil traders, the summit's tone will be a key driver of risk sentiment. Live fuel prices and charts on NowPrice show how the market is reacting to the geopolitical uncertainty, with crude benchmarks fluctuating on every headline. The crack spread—the difference between crude oil and refined product prices—has widened as refineries face higher input costs, while China's marginal demand for crude remains a wildcard, given its role as the world's largest importer. A contango structure in futures markets could signal oversupply, but backwardation would indicate tightness, especially if the blockade persists.

Looking ahead, traders will watch for any joint statement or policy signals regarding energy security and trade. A de-escalation in tensions could ease supply fears, while a breakdown in talks might push oil prices higher, especially if the blockade persists. The next major data point is the weekly EIA inventory report, which will provide further clues on demand and supply balances. Additionally, any signs of Saudi-Russia coordination on output adjustments could sway prices, as the two producers have historically managed supply to stabilize markets. The contango or backwardation in the forward curve will also offer insights into market expectations for the coming months.