[WORLD] Crude oil futures climbed more than US$1.60 a barrel on Tuesday, buoyed by a temporary easing of U.S.-China trade tariffs and a cooler-than-expected inflation report.
Brent crude closed at US$66.63 per barrel, gaining US$1.67 or 2.57%, while U.S. West Texas Intermediate (WTI) crude settled at US$63.67, up US$1.72 or 2.78%. The gains followed a strong rally in the previous session, when both benchmarks surged over 4% after the U.S. and China announced a significant reduction in import tariffs for at least 90 days—a move that also boosted Wall Street and strengthened the U.S. dollar.
"We didn’t participate in yesterday’s China-fueled rally to the same extent as other markets, so we’re playing catch-up today," said John Kilduff, partner at Again Capital LLC. "Plus, this morning’s data gives the Federal Reserve some breathing room to potentially make policy shifts."
The U.S. Labor Department reported that the Consumer Price Index (CPI) rose 2.3% year-over-year through April, marking the smallest annual increase in four years. The moderation in inflation prompted major financial institutions including JPMorgan Chase and Barclays to revise down their projections for a U.S. recession in the near term.
Easing inflation has helped alleviate market concerns, granting the Federal Reserve more flexibility in shaping its monetary policy. With the central bank holding interest rates steady since its last cut in December, the latest data suggests the Fed may maintain its wait-and-see approach amid ongoing economic uncertainty.
Alongside the inflation data, geopolitical developments also continue to sway oil markets. While the tariff relief between Washington and Beijing offered a short-term lift, ongoing tensions in regions like the Middle East remain a potential source of volatility. Heightened instability in these areas could trigger supply disruptions, further impacting global oil prices.
“All the numbers are bullish today,” said Phil Flynn, senior analyst at Price Futures Group. “The inflation data and broader economic indicators are very supportive.”
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, are preparing to increase oil exports through May and June. OPEC's production rose more than anticipated in April, and output in May is expected to climb by 411,000 barrels per day. While the uptick in supply could cap further price gains, analysts caution that the oil market remains highly sensitive to shifts in global demand and geopolitical events.
According to sources cited by Reuters, Saudi Arabia—the second-largest crude supplier to China after Russia—plans to maintain steady oil shipments to China in June, following a surge in May that marked the highest level in over a year after OPEC+ agreed to raise production.
Despite broader concerns over weakening crude demand, refined fuel markets continue to show resilience. “Even as the outlook for crude softens, fuel market indicators remain robust,” JPMorgan analysts noted in a research report.
Although global crude prices have retreated by 22% from their January 15 peak, prices for refined products and refining margins have held firm. A decrease in refining capacity, particularly in the U.S. and Europe, has tightened the supply of gasoline and diesel, increasing reliance on imports and heightening vulnerability to price spikes during refinery maintenance or unexpected outages, the analysts added.
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