[NEW YORK] Oil prices climbed about 3 per cent on Tuesday on signs of higher demand in Europe and China, lower production in the US, tensions in the Middle East and as buyers emerged the day after prices fell to a four-year low.
Brent futures rose US$1.92, or 3.2 per cent, to settle at US$62.15 a barrel, while US West Texas Intermediate (WTI) crude gained US$1.96, or 3.4 per cent, to close at US$59.09.
Both benchmarks rose out of technically oversold territory, the day after posting their lowest settlements since February 2021 on a decision by Opec+ to boost output.
“The market may be seeing some bottom fishing with a significant amount of profit taking out of short holdings, a major contributor to today’s price rebound,” analysts at energy advisory firm Ritterbusch and Associates said.
Opec+, the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, decided over the weekend to speed up oil production hikes for a second consecutive month.
“After evaluating the latest Opec+ move to accelerate the easing of supply cuts, market players are focusing on developments in trade and the possibility … that trade deals will be reached,” said Tamas Varga, an analyst at PVM, a brokerage and consulting firm that is part of TP ICAP.
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Varga also pointed to the rise in geopolitical risk premium in the Middle East as Israel struck Iran-backed Houthi targets in Yemen as a retaliation for an assault on Ben Gurion airport.
US President Donald Trump, however, said the US will stop bombing the Houthis in Yemen, saying that the group had agreed to stop interrupting important shipping lanes in the Middle East.
Prices also drew support after consumers in China increased spending during the May Day celebration and as market participants returned after the five-day holiday.
The US dollar fell to a one-week low against a basket of currencies as investors grew impatient about trade deals. A weaker US currency makes dollar-priced oil less expensive for buyers using other currencies.
In addition, lower oil prices in recent weeks have prompted some US energy firms like Diamondback Energy and Coterra Energy to announce that they would cut some rigs, which analysts said should over time increase prices by reducing output.
Ahead of weekly US oil inventory data, analysts forecast crude stockpiles fell about 800,000 barrels last week.
If correct, that would be the first time stockpiles fell for two consecutive weeks since January. That compares with an decrease of 1.4 million barrels during the same week last year and an average decrease of 100,000 barrels over the past five years (2020-2024).
Growth in Europe?
In Europe, companies are expected to report growth of 0.4 per cent in first-quarter earnings, LSEG I/B/E/S data showed, an improvement over the 1.7 per cent drop analysts had expected a week ago.
The European Union trade chief said the 27-nation bloc is under no pressure to accept an unfair tariff deal with the US.
The European Commission, meanwhile, proposed adding more individuals and over 100 vessels linked to Russia’s shadow fleet to its 17th package of sanctions against Moscow in response to Russia’s 2022 invasion of Ukraine.
Trump said late on Monday he would announce pharma tariffs over the next two weeks, his latest action on levies that have roiled global financial markets over the past months.
US Treasury Secretary Scott Bessent said the Trump administration could announce trade agreements with some of the United States’ largest trade partners as early as this week, but gave no details on which countries were involved.
The US trade deficit widened to a record high in March as businesses boosted imports of goods ahead of tariffs, which dragged gross domestic product (GDP) into negative terrain in the first quarter for the first time in three years.
The Federal Reserve is widely expected to leave interest rates unchanged on Wednesday as tariffs roil the economic outlook.
An interest rate cut could spur economic growth and thus, oil demand. But tariffs raise prices, and the Fed uses higher interest rates to combat inflation. REUTERS