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Crude oil prices edged slightly higher on Tuesday, buoyed by a weaker dollar, but gains were restrained by persistent concerns about a U.S. economic slowdown and the impact of escalating tariffs on global trade.
Brent crude futures settled 28 cents, or 0.4%, higher at $69.56 a barrel after dipping to $68.63 in early trading. U.S. West Texas Intermediate (WTI) crude futures gained 22 cents, or 0.3%, to $66.25 a barrel, recovering from earlier declines. Both benchmarks had closed 1.5% lower in the previous session.
The recovery occurred as the dollar index hit a four-month low, making oil more affordable for international buyers. However, the gains were tempered by significant market volatility.
Stocks, often a leading indicator for crude prices, were showing signs of correction following a steep Monday decline, with the S&P 500 posting its largest single-day drop since December 18 and the Nasdaq experiencing its biggest percentage fall since September 2022.
The announcement of an additional 25% tariff on Canadian steel and aluminum imports, bringing the total tariff to 50%, further unsettled markets. “That kind of drama is adding to the volatility here,” said a market analyst. Protectionist policies, including tariffs on major oil suppliers, continued to fuel market uncertainty.
Adding to the unease, the possibility of a “period of transition” and a potential U.S. recession was acknowledged over the weekend.
On the supply side, U.S. crude oil production is projected to reach a record 13.61 million barrels per day (bpd) this year.
Investors are now focused on upcoming U.S. inflation data, due on Wednesday, for clues on future interest rate decisions.
Meanwhile, they are closely monitoring OPEC+ plans after the producer group announced plans to increase output in April. Market analysis suggested that a scaling back of U.S. tariffs would ease fears of inflation and economic contraction, however, the recent oil price plunge meant it was “hard to see OPEC+ going ahead with its plan and releasing oil back to the market from April.”
On Friday, it was indicated that OPEC+ would proceed with its April increase but might subsequently consider further actions, including production cuts.
If oil prices fall below the $70 per barrel mark for an extended period, output hikes may be paused in our opinion. OPEC+ will also keep a careful eye on international policies,” said an energy sector analyst, noting that Brent was finding strong technical support around $70 a barrel.
In the U.S., a poll indicated that crude oil stockpiles were expected to have risen last week, while distillate and gasoline inventories likely fell. The poll was conducted ahead of reports from the American Petroleum Institute (API) and the Energy Information Administration on Wednesday.
