Oil Prices Edge Higher After Sell-Off, but Tariff and Fed Policy Risks Cloud Outlook
Crude rebounds slightly on short-covering, while concerns over global demand, trade tensions, and U.S. monetary policy weigh heavily on investor sentiment.
Oil prices rose modestly on Tuesday, reversing part of Monday’s sharp losses as traders moved to cover short positions. However, mounting concerns about global economic stability—spurred by trade tensions and uncertainty over U.S. interest rates—continue to cloud the outlook for energy markets.
As of 06:00 UTC, Brent crude futures were up little more than 40 cents, or 0.6%, trading at $66.68 a barrel. Meanwhile, the U.S. West Texas Intermediate (WTI) crude contract for May delivery, which expires today, rose around 45 cents, or 0.7%, to $63.5. The more actively traded WTI June contract gained 0.7% to $62.8 per barrel.
The modest rebound comes after both benchmarks fell more than 2% on Monday. That sell-off was largely driven by optimism around U.S.-Iran nuclear negotiations, which investors interpreted as a potential path toward easing supply constraints in the oil market.
Strategic Rebound, Lingering Caution
“Some short-covering emerged after Monday’s sharp sell-off,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment. “However, concerns about a potential recession driven by the tariff war persist.”
Kikukawa noted that WTI crude is likely to remain in a trading range between $55 and $65 for the time being, as investors weigh the risks of slowing demand due to macroeconomic uncertainty.
Trump’s Criticism of Fed Fuels Volatility
Adding to the cautious sentiment, U.S. President Donald Trump on Monday renewed his criticism of Federal Reserve Chair Jerome Powell, calling for immediate interest rate cuts. Trump warned that the U.S. economy could falter unless the Fed acts quickly.
His comments sent shockwaves through financial markets, stoking fears about the independence of the central bank. Major U.S. stock indexes declined, and the dollar index slid to its lowest level in three years.
“The growing uncertainty surrounding U.S. monetary policy is expected to negatively impact financial markets and the broader economy,” Kikukawa added. “That, in turn, raises fears that we could see a decline in global oil demand.”
Geopolitical Tensions Add to Market Jitters
Beyond monetary policy concerns, energy markets continue to grapple with geopolitical instability and ongoing trade frictions. The tariff war between major global economies remains a wildcard, potentially curbing industrial activity and fuel consumption worldwide.
While Tuesday’s price uptick reflects a temporary reprieve, the broader trend underscores a fragile market. Investors remain wary of betting on a sustained recovery in crude prices without clear signals of economic resilience or progress in resolving trade and policy uncertainty.
As markets await further developments from central banks and global trade negotiations, oil’s path forward may depend more on macro headlines than traditional supply-demand fundamentals.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
