Insights 
VT 
West Texas Intermediate (WTI) crude oil price recovered during Thursday’s Asian session, trading around $58.10 per barrel. This rebound followed a decline in US crude inventories, with stockpiles falling by 2.032 million barrels as reported by the EIA for the week ending May 2.
Nonetheless, uncertainty looms over US-China trade talks, affecting the oil market. As leading oil consumers, tensions between these nations affect sentiment, with a scheduled meeting in Switzerland aimed at reviving stalled negotiations.
Us China Trade Tensions
US President Trump stated China started the talks but opposed tariff reductions. Treasury Secretary Scott Bessent set moderate expectations, seeing the meeting as a preliminary discussion step.
Despite intentions to negotiate, apprehension persists as the trade dispute threatens global oil demand. Brent crude prices rose amidst hopes of progress, although experts stress tariff resolutions are vital for demand improvement.
Federal Reserve Chair Jerome Powell added that extended tariff policies could jeopardise economic goals. The Fed is exercising caution on interest rate changes due to the continued policy instability. While previous trade tensions have affected business confidence, the Fed identifies no pressing need for rate adjustments unless economic conditions worsen.
The initial paragraph outlines that the price of West Texas Intermediate crude saw a short-term bounce, trading near $58.10 during the Asian markets on Thursday. This was directly tied to a reported fall in US crude inventories—the US Energy Information Administration confirmed a 2.032 million-barrel drawdown for the week ending May 2. Lower inventories often tighten supply, nudging prices higher when demand remains steady, hence the minor upward movement in this case.
Impact On Market Sentiment
However, optimism remains limited. Tensions between the United States and China are still an overhang. Both countries are major consumers of oil, so when negotiations between them stall or deteriorate, the worry over future demand tends to cap any lasting price recoveries. A new round of discussions is reportedly planned in Switzerland, which could offer fresh direction depending on how talks progress. But hopes are being tempered by the officials involved.
From the US side, Trump remarked that while China had reopened the dialogue, they resisted any movement on reducing existing tariffs—something that’s been a sticking point throughout. Meanwhile, Bessent described the talks as little more than a feeling-out session. That stance suggests that any breakthrough will not come quickly, and the parties are still far from agreement.
On our end, what this puts into play is a broader sense of caution. Market participants who trade price volatility, particularly in structured products or options tied to energy pricing, should be alert to how these policy statements trickle into sentiment and positioning. At the same time, Brent crude—which often reflects global demand dynamics more than WTI—has been inching upward, but not in a way that shows any true shift in mood. Rather, it appears to be nudged by short-term risk optimism.
Powell has sounded a warning regarding the possible macroeconomic consequences of sustained tariff friction. Specifically, he noted how it complicates things for the Federal Reserve, which isn’t eager to alter rate paths unless rattled by broader disruptions. Business confidence, already sensitive due to previous trade shocks, remains on a tightrope. His measured tone implies the Fed is not poised to act unless the existing calm gives way to hardened economic indicators.
For those of us involved in derivatives tied to commodities and broader macro outcomes, the watchpoints are building. Preparedness—less in the form of directional conviction and more in terms of understanding how these overlapping macro drivers affect gamma and forward curve sentiment—will be key. If inventories continue to decline but demand signals waver due to policy instability, we could see short-lived spikes facing quick reversion.
From a volatility perspective, one should also monitor implied versus realised gap movements over the next few weeks, particularly as headline sensitivity returns to pricing. With sentiment being yanked between inventory surprises and geopolitical uncertainty, the window for premium harvesting may narrow or invert unexpectedly.
What we’re observing is a fading of last quarter’s calm. There’s no recession panic, not yet—but there are more questions being asked, and fewer answers being offered in definitive terms. That difference, at least for now, reshapes how risk is being priced.
