Week in Review: Fuel Prices Climb on Trade Talks and US Supply Strains

Oil prices climbed on Friday, with both Brent and WTI benchmarks nearing 10-day highs and on track to rise more than 4% for the week. Brent crude was up $1.22 to $64.06/bbl, while WTI rose $1.26 to $61.17/bbl. The increase was brought on by easing trade tensions between the U.S. and China, the world’s two largest oil consumers. Bullish sentiment was fueled by President Trump’s comments suggesting a willingness to lower tariffs on China, paired with plans for a May 10 meeting between U.S. Treasury Secretary and China’s Vice Premier to further trade negotiations.

Trump also reaffirmed his tough stance on Chinese imports, stating that an “80% tariff on China seems right,” while signaling potential flexibility if progress is made in upcoming talks. Despite this, a finalized trade agreement remains unlikely in the immediate term. Still, the softening tone has reduced recession fears and supported oil demand sentiment. April trade data from China showed a faster-than-expected rise in exports and a narrower import decline, offering a modest boost to economic outlooks ahead of the talks.

On the supply side, the UK announced its largest sanctions package against Russia’s oil trade, planning to target up to 100 tankers in Putin’s “shadow fleet.” Meanwhile, the U.S. sanctioned a third independent Chinese refinery and three port terminal operators over Iranian crude purchases, further escalating efforts to curb Iranian oil revenue before this weekend’s U.S.-Iran nuclear deal talks.

Despite upward pressure from sanctions, supply risks were tempered by OPEC+’s plans to gradually unwind production cuts. However, actual OPEC production slipped in April, with declines in Libya, Venezuela, and Iraq offsetting scheduled increases.

Domestically, drilling activity in Texas dropped to its lowest since February 2021, with permit applications falling from 795 in March to 570 in April—a potential signal of tightening U.S. supply.

Another sign of tightening supply is San Francisco diesel basis prices have risen to over 60 cents above the futures market, while Louisiana sits around 5 cents over, creating a significant pricing gap. This is largely due to tight regional supply on the West Coast, where production issues have limited availability. While imports may help rebalance the market, it could take several weeks for the differential to normalize. Until then, West Coast fuel prices are likely to remain elevated as supply logistics and market dynamics work to close the gap.

Prices in Review

Crude prices opened at $56.76 on Monday and saw steady gains throughout most of the week, with the sharpest increase occurring on Wednesday when prices climbed to $58.98. After a brief dip on Thursday to $57.93, prices surged again on Friday, opening at $60.25. Overall, crude rose by $3.49 for the week, marking a 6.15% increase.

Diesel prices opened at $1.96 on Monday and experienced moderate volatility throughout the week. Prices gradually increased through midweek, peaking at $2.0016 on Wednesday before dipping slightly to $1.9701 on Thursday. On Friday, diesel reversed sharply to open at $2.0539. Overall, prices rose by $0.0939, reflecting a 4.79% increase for the week.

Gasoline prices opened at $1.9940 on Monday and climbed steadily through midweek, reaching a high of $2.0594 on Wednesday. After a slight dip to $2.0224 on Thursday, prices surged again on Friday, opening at $2.0980. Overall, gasoline prices increased by $0.1040, representing a 5.22% gain for the week.