London Calling
Last week, the front-month Brent futures contract recorded its first w/w increase in three weeks, with the contract closing above $66/bbl for the first time since 26 April. At the time of writing, the M1 Brent futures contract stands at $66.90/bbl. Nevertheless, while ICE COT data for the week ending 6 June show money-managed long positions in Brent futures rose w/w, net long positions (longs minus shorts) have held relatively flat for a fourth consecutive week as short positions also increased. Against this backdrop, we expect the M1 futures contract to encounter resistance around the $68/bbl handle mid-week and end the week between $64 and $66/bbl.
Key drivers to monitor for price action this week include:
- US-China trade talks in London
- Saudi Arabian crude oil allocations to China
- Near-term technical resistance levels
Top officials from Washington and Beijing are set to meet in London on 9 June to address their ongoing trade dispute. This follows an hour-long call last week in which Chinese President Xi Jinping urged US President Donald Trump to back down from the US’s trade measures. President Trump hailed this call as a “very positive conclusion” on social media, although it is yet to be determined whether today’s talks will yield a similar result. A trade deal would ease tensions and boost manufacturing demand in both countries, with recent data flagging concerns. Chinese exports underwhelmed markets in May 2025 as US-bound shipments slid to their weakest level since 2020. While some of this slowdown may have been a correction to the previous two months’ opportunistic pre-tariff buying, deflation also continues to persist in China alongside a lower-than-expected decline in Chinese imports in May, which hints that domestic consumption may also be cooling, which could further dent global oil demand.
The oil market will also eye Saudi Arabia’s July crude oil allocation to Chinese refiners this week. Last month, June allocations stood at 47.5mb, just 0.5mb below May’s. However, a higher-than-expected July allocation could indicate rising demand for crude from Chinese refineries as they return from maintenance. China’s daily crude oil imports slipped to a four-month low in May, suggesting that peak maintenance is behind us and underpinning a supportive outlook for demand.
Thirdly, we recommend monitoring near-term resistance levels for a potential sell-off at these levels. The next hurdle for price action lies at the upper Bollinger band at around $66.75, which has capped market gains multiple times over the past month. Above this, further resistance may be seen at $68/bbl, which marks the 38.2% Fibonacci retracement level from the M1 contract’s $82.55/bbl high in January 2025 and $59/bbl low in April 2025. This level aligns with a descending trendline followed by price action throughout this year, adding to its significance as near-term resistance. Finally, should $68/bbl give way, the $70 bbl handle becomes the next likely psychological barrier, coinciding with the 50% Fibonacci retracement level taking the previous ranges.
