Global oil prices ease amid temporary tariff relief

[WORLD] Oil prices edged lower on Tuesday, retreating from a two-week high reached in the prior session, as markets digested the temporary tariff truce between the United States and China — a move that had sparked hopes of a potential resolution to the prolonged trade dispute between the world's two largest economies.

The agreement, which involves both nations reducing steep tariffs for a minimum of 90 days, triggered sharp gains across financial markets on Monday, lifting Wall Street equities, the U.S. dollar, and crude oil benchmarks.

Despite the initial market rally, analysts caution that the ceasefire may offer only short-term relief. Uncertainty continues to cloud the long-term demand outlook for oil, as the global economy still contends with the lingering impact of trade tensions. A potential re-escalation of the conflict could swiftly negate recent price gains.

Underlying issues that fueled the trade rift remain unresolved — including the sizeable U.S. trade deficit with China and President Donald Trump’s demands for more robust action from Beijing to address the U.S. opioid crisis, particularly fentanyl trafficking.

Adding further complexity to the oil market, OPEC’s recent decision to ramp up production has introduced additional volatility. The increase, aimed at price stabilization, is being closely monitored by traders and analysts. Any further shifts in the cartel’s strategy could significantly sway market sentiment and pricing.

As of 0011 GMT, Brent crude futures were down 14 cents, or 0.2%, at $64.82 per barrel, while U.S. West Texas Intermediate (WTI) crude slipped 13 cents, also 0.2%, to $61.82 a barrel.

Beyond geopolitical developments, domestic supply factors in the U.S. are also exerting downward pressure on prices. A rise in U.S. oil production has resulted in a supply surplus, with analysts expecting the oversupply to persist in the near term — a trend that may continue to weigh on prices.

Both Brent and WTI had closed around 1.5% higher on Monday, marking their strongest finishes since April 28. The gains follow a turbulent stretch for oil markets, which last month saw prices tumble to four-year lows amid investor concerns that the U.S.-China trade standoff could stifle economic growth and curb oil consumption.

Further compounding the volatility, OPEC's announcement of a larger-than-anticipated output increase continues to influence the market's fragile balance.