Crude oil futures jumped more than $1.60 per barrel on Tuesday, bolstered by a combination of easing U.S.-China trade tensions and unexpectedly mild inflation data in the U.S., which together improved the market’s risk appetite. Brent crude settled at $66.63 per barrel, gaining $1.67, or 2.57%, while U.S. West Texas Intermediate (WTI) crude climbed $1.72, or 2.78%, to finish at $63.67.
“We didn’t participate as much as other markets did yesterday in the China boom, so we’re catching up today,” said John Kilduff of Again Capital LLC. He added that favorable U.S. economic data provided additional support for energy markets. On Tuesday, the U.S. Labor Department reported that the Consumer Price Index rose 2.3% year-over-year in April—its slowest pace in four years. The softer inflation reading prompted major Wall Street firms like JPMorgan and Barclays to trim their recession forecasts, boosting sentiment.
“This is one of those rare days where all the numbers are bullish,” said Phil Flynn of Price Futures Group. “The inflation number, the economic data—they’re very supportive for oil.”
Despite the optimistic economic signals, potential headwinds remain. The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are ramping up oil output, which may limit further price gains. OPEC’s May production is expected to rise by 411,000 barrels per day, according to market sources. Additionally, Saudi Arabia’s crude exports to China are set to hold steady in June after surging to a 13-month high in April, reflecting strong demand in Asia.
However, some analysts argue that refined fuel markets are providing counterbalance to concerns about oversupply. “Despite the deteriorating outlook for crude demand, positive signals from the fuel markets cannot be overlooked,” JPMorgan analysts noted. While international crude prices have declined about 22% since peaking in mid-January, both refined product prices and refining margins have held firm.
A reduction in refining capacity, particularly in the U.S. and Europe, is tightening global gasoline and diesel supplies. This is making the market more vulnerable to price spikes during refinery maintenance or unexpected outages, increasing reliance on imports to meet demand.