Oil prices bounced back over 1 percent on Tuesday due to a technical recovery and dip buying following a decline in the previous session driven by OPEC+‘s decision to accelerate output increases. However, concerns regarding the market surplus outlook continue to linger.
Brent crude futures increased by 92 cents, reaching $61.15 a barrel by 03:09 GMT (now standing at $61.20), while U.S. West Texas Intermediate crude added 89 cents to settle at $58.02 a barrel (currently $58.05). Both benchmarks had closed at their lowest levels since February 2021 on Monday, influenced by OPEC+’s decision over the weekend to further speed up oil production hikes for a second consecutive month.
The slight rebound in oil prices appears to be more technical than fundamentally driven. Market analysts noted that persistent challenges, including a significant shift in OPEC+ production strategy, uncertain demand due to U.S. tariff risks, and downgrades in price forecasts, continue to exert pressure on overall price movements. Oil has lost over 10 percent in six consecutive sessions and has declined more than 20 percent since April, as tariff shocks from U.S. President Donald Trump heightened fears of a global economic slowdown.
The return of Chinese market participants after a five-day public holiday since May 1 was seen as a factor supporting prices on Tuesday. As the largest importer of oil, increased Chinese activity suggests buyers may be eager to secure oil at current low levels.
Positive data from the U.S. services sector
Adding to the support for oil prices was data indicating a pickup in growth within the U.S. services sector, the world’s major oil consumer. The Institute for Supply Management reported its non-manufacturing purchasing managers index (PMI) rose to 51.6 last month, up from 50.8 in March, contrary to economists’ expectations of a decrease to 50.2.
Read more: Oil prices drop over $2 as OPEC+ agrees to increase production by 411,000 barrels
Fed’s rate decision looms
The U.S. Federal Reserve is expected to leave interest rates unchanged on Wednesday as tariff-related uncertainties continue to impact the economic outlook. Barclays has revised its Brent crude forecast downward by $4 to $70 a barrel for 2025 and set its 2026 estimate at $62 a barrel, citing a challenging landscape for fundamentals amid escalating trade tensions and OPEC+’s shift in production strategy.
