Oil prices climbed around 4% on Tuesday, rebounding from a sharp selloff the previous day as signs of stronger demand from Europe and China, rising geopolitical tensions in the Middle East, and bargain buying supported the market. Brent crude futures rose $2.37, or 3.9%, to settle at $62.60 a barrel, while U.S. West Texas Intermediate (WTI) crude gained $2.42, or 4.2%, to close at $59.55. Both benchmarks moved out of technically oversold territory after hitting their lowest levels since February 2021 on Monday.
The gains came in the wake of OPEC+’s decision over the weekend to accelerate production increases for a second straight month, which had previously sent prices tumbling. However, market participants appeared to reassess the move and shift their focus to trade developments and geopolitical risks. Notably, Israel struck Iran-backed Houthi targets in Yemen following an assault on Ben Gurion airport, raising the Middle East risk premium.
In China, consumer spending surged during the May Day holiday, supporting demand expectations as markets reopened after a five-day break. Analysts also cited renewed buying interest from China, the world’s largest oil importer, as a driver of Tuesday’s price recovery.
European economic sentiment also helped buoy oil prices. First-quarter earnings growth for European companies is now expected at 0.4%, a reversal from the 1.7% decline forecasted just a week prior. Meanwhile, the European Commission proposed tougher sanctions on Russia, including targeting its shadow fleet, and U.S.-EU trade tensions remained a background factor as the bloc resisted pressure to accept unfavorable tariff terms from Washington.
In the U.S., the dollar fell to a one-week low, making dollar-denominated oil more attractive to foreign buyers. The U.S. trade deficit widened to a record in March due to businesses accelerating imports ahead of new tariffs. The resulting drag on first-quarter GDP pushed it into negative territory for the first time in three years. UBS projected GDP growth would slow to 1.5% this year, down from 2.8% in 2024, but stop short of a full-blown recession if trade deals ease tariff burdens. With the Federal Reserve expected to leave interest rates unchanged on Wednesday, investors remain wary of how the interplay between tariffs, inflation, and monetary policy will impact future oil demand.