# Trump-Xi Deal Sparks Oil Rally Despite Fresh Hormuz Attacks

15 May 2026 · OILAV

**China's crude buying pledge and diplomatic coordination on Hormuz sends Brent to $107.85, but new vessel seizures keep supply risk premium intact.**

## Key levels

- Brent: support 105, resistance 110
- WTI: support 101, resistance 105.5

## Price Action & Technicals

> The technical breakout is real — both crudes have room to run to $110+ Brent and $105+ WTI.

**Brent crude surged 3.49% over five days to $107.85** following Trump's announcement that China agreed to purchase U.S. crude during Beijing summit talks. **WTI outperformed with a 5.61% weekly gain to $103.57**, breaking convincingly above the $100 psychological level that had capped rallies for weeks. The **oil volatility index dropped 4.61% to $68.92**, signaling some risk premium unwinding despite ongoing Hormuz disruptions.

**Technical momentum favors further upside** with both benchmarks clearing key resistance levels. Brent's break above $107 opens the path to $110-112, while WTI's sustained hold above $103 targets the $105-107 zone. **Volume patterns support the breakout** with WTI posting 712K contracts versus Brent's more modest 103K, indicating stronger conviction in U.S. crude's premium narrowing story.

## Supply & Disruptions

> Physical tightness remains extreme despite diplomatic progress — supply fundamentals support triple-digit prices.

**The Strait of Hormuz remains effectively closed** despite Trump-Xi diplomatic coordination, with UKMTO reporting fresh vessel seizures northeast of Fujairah. **Chinese tankers have resumed limited transit under Iranian coordination**, but flows remain a fraction of the pre-war 21 million bpd that normally passes through the chokepoint. **U.S. production holds steady at 13.71 million bpd** while imports averaged 5.9 million bpd last week.

**Russia's Urals blend is capturing massive premiums** as Asian buyers scramble for alternatives to blocked Middle Eastern crude. **Canada is fast-tracking pipeline capacity** with Ottawa and Alberta meeting Friday on a new 1 million bpd project, recognizing the strategic opportunity created by Hormuz disruptions.

## Geopolitics & Diplomacy

> Diplomacy is advancing but implementation remains messy — expect continued volatility until physical flows resume.

**Trump's Beijing summit yielded China's commitment to purchase U.S. crude** and coordinate on Hormuz reopening efforts, marking the first major diplomatic breakthrough since the Iran conflict began. **Admiral Cooper confirmed Operation EPIC FURY rolled back '40 years' of Iranian military investment**, significantly degrading Tehran's ability to project power in the Gulf. **Iran's post-Khamenei leadership remains fragmented**, complicating ceasefire negotiations despite Chinese mediation efforts.

**Fresh attacks on vessels near Hormuz** occurred even as Trump and Xi discussed the crisis, underscoring how decentralized Iranian proxy forces continue operating despite diplomatic channels. **The White House emphasized Chinese behind-the-scenes coordination** will be crucial for any sustainable Hormuz reopening.

## Positioning & Flows

> Spec positioning supports higher prices, but product cracks suggest demand destruction is beginning to bite.

**Money managers hold 131,956 net long contracts** as of May 5, with **open interest surging 115,738 contracts** indicating massive new positioning ahead of potential Hormuz resolution. **The long-to-short ratio of 2.6:1 remains elevated** but well below panic levels, suggesting room for further bullish positioning if diplomatic progress continues.

**Product crack spreads are diverging sharply** — heating oil gained just 0.14% while gasoline fell 2.36%, reflecting seasonal patterns and China's projected 5.5% gasoline demand drop due to high prices. **Asian physical premiums remain extreme** with Middle Eastern crude effectively unavailable.

## Macro & Cross-Asset

> High oil prices are fracturing global growth patterns — demand destruction is accelerating in key Asian markets.

**China's gasoline consumption is on track to plunge 5.5% in 2026** as sustained high oil prices accelerate demand destruction in the world's second-largest economy. **Taiwan faces critical LNG shortages** with 99% import dependence and one-third of supplies normally transiting Hormuz. **Natural gas markets show extreme regional divergence** — European and Asian prices soaring while Permian producers pay buyers to take gas away.

**Venezuela's $150 billion debt restructuring** signals emerging market stress from sustained high energy prices, while **Mexico's Pemex CEO resignation** adds uncertainty to North American supply chains. **India's economic pain intensifies daily** as Hormuz closure enters its third month.

## What to watch

- Trump-Xi follow-up statements on implementation timeline
- Weekend Hormuz transit attempts by commercial vessels
- Monday's API inventory data for demand destruction signals
- OPEC+ emergency meeting speculation if prices hold above $105
- Canadian pipeline announcement Friday Ottawa-Alberta meeting

## Risks to the view

- Hormuz attacks escalate despite diplomatic progress (likely)
- China crude buying pledge proves empty rhetoric (possible)
- OPEC+ surprise production increase above $105 Brent (tail risk)

## Outlook

Diplomatic momentum supports $110+ Brent near-term, but demand destruction accelerating above these levels. Physical tightness trumps macro headwinds through June, then fundamentals rebalance as either Hormuz reopens or recession bites.