Oil Slips After 3-Day Rally on Iran Ceasefire, Trump-Xi Summit

That counterintuitive move makes sense when you consider the supply channel. A Trump-Xi meeting could lead to a broader deal that includes energy purchases, potentially unlocking more U.S. crude exports to China or easing sanctions that currently constrain certain flows. The immediate effect is a reduction in the uncertainty premium that had been embedded in prices. The demand boost from trade de-escalation is a slower, second-order effect; the supply-side easing is the faster repricing.

Commodities analysis often shows that crude reacts first to the supply implications of geopolitical headlines, then adjusts to demand signals later. The slip after the summit news fits that pattern.

The Three-Day Rally That Just Broke

The decline ended a three-day rally that had pushed crude higher on a mix of technical buying and lingering supply fears. Without a concrete disruption, those gains were always vulnerable. The rally was built on sentiment, not a physical shortage, and the twin catalysts of ceasefire talks and a potential summit provided a reason to take profits.

This sequence highlights a recurring dynamic in oil markets: short-covering rallies driven by headline risk can reverse just as quickly when the headlines shift. The speed of the pullback suggests that speculative length had become stretched and that the market was looking for an excuse to sell.

What Confirms or Weakens the Setup

The next decision point is whether either catalyst produces a concrete announcement. A formal ceasefire agreement or a confirmed summit date would likely extend the decline, as it would validate the de-escalation thesis and further compress the risk premium. If talks stall or break down, the premium could snap back, and the three-day rally might look like a preview of a larger move.

For now, the market is in a holding pattern, repricing probabilities rather than certainties. The slip is a reminder that in oil, the removal of a tail risk can be just as powerful as the arrival of a new supply disruption.