Oil prices pulled back early Tuesday following a short-lived rally that pushed benchmarks to their highest in over two weeks. The retreat reflects investor concerns about oversupply and doubts surrounding the durability of the U.S.-China trade agreement.
Brent crude futures edged down $0.11 to $64.85 per barrel, while West Texas Intermediate (WTI) lost $0.08 to $61.87. Despite Monday’s 1.5% gains—driven by easing trade tensions—the momentum faded quickly as traders weighed long-term structural risks.
The recent accord between Washington and Beijing slashes mutual tariffs by 115% for a 90-day pause, prompting an initial surge in oil, equities, and the dollar. Yet analysts warn the truce may be temporary, given unresolved tensions around trade imbalances and U.S. fentanyl concerns.
“While the pause is constructive,” noted ING analysts, “uncertainty over what happens next may continue to restrain demand growth expectations.”
Supply Surge Sparks Fresh Concerns
Beyond geopolitics, rising oil supply has reemerged as a key headwind. Analysts report that the Organization of the Petroleum Exporting Countries (OPEC) has boosted output by 411,000 barrels per day since April, outpacing earlier estimates.
Key supply-side developments:
- OPEC+ output expected to remain high through June
- U.S. production continues to rise amid stable shale activity
- Inventory builds across Asia suggest ample short-term availability
ING noted that the oil market appears “well supplied” heading into mid-year. How OPEC+ executes its May–June supply strategy will be critical in shaping the second-half price trajectory.
Refined Fuels Offer Demand Support
Despite pressure on crude prices, refined fuel demand continues to show resilience. Analysts at J.P. Morgan highlight that gasoline and diesel balances are tightening due to reduced refining capacity in both the U.S. and Europe.
This has led to higher reliance on imports and raised vulnerability to price shocks during maintenance or outages.
- Singapore refining margins nearly doubled in May
- May avg: $6.60/barrel
- April avg: $3.65/barrel
(Source: LSEG Pricing Data)
These refined product dynamics are helping to partially offset broader bearish sentiment in crude oil markets.
As traders await further clarity from both OPEC and U.S.-China negotiations, short-term oil pricing is likely to remain volatile and reactive to supply-demand shifts and macroeconomic signals.
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