Oil Prices Hold Ground Amid Trade Truce Uncertainty And Rising Output

Since April, the OPEC has expanded production beyond previous estimates. May’s supply alone is expected to grow by 411,000 barrels per day, adding pressure to an alreayd sensitive market.

Amid concerns over weakening crude demand, analysts have pointed out that refined fuel markets continue to show strength.

Source : Freepik

Crude oil prices remained largely unchanged on Tuesday as the market weighed mixed signals from a temporary US-China tariff pause and the prospect of rising global oil supply. The cautious sentiment among investors reflected broader concerns that the current trade ceasefire may not translate into a lasting resolution.

Brent crude edged up by 9 cents, or 0.14 per cent, to $65.05 a barrel around 1:30 PM. Similarly, US West Texas Intermediate (WTI) crude saw a marginal increase of 11 cents, or around 0.2 per cent, reaching $62.06. These modest gains follow a more significant rally of 4 per cent or higher in the previous trading session, driven by the announcement that the United States and China would scale back tariffs for at least 90 days. That development also gave a boost to equity markets and supported a stronger dollar.

Supply Pressures Offset Trade Optimism

Despite the initial optimism surrounding the trade détente, analysts are cautious about oil’s upward momentum, especially with additional supplies on the horizon. Tamas Varga of PVM highlighted the market’s hesitancy to fully embrace the trade news, noting that “coupled with the scheduled steep increase in OPEC+ supply in May and June, the upside might prove limited.”

Increased output from OPEC countries is already being felt. Since April, the Organisation of the Petroleum Exporting Countries (OPEC) has expanded production beyond previous estimates. May’s supply alone is expected to grow by 411,000 barrels per day, adding pressure to a market already sensitive to demand fluctuations.

Fuel Demand Offers Some Support

Amid concerns over weakening crude demand, analysts have pointed out that refined fuel markets continue to show strength. JPMorgan analysts emphasised this contrast in a recent research note: “Despite the deteriorating outlook for crude demand, positive signals from the fuel markets cannot be overlooked.”

According to their analysis, international crude prices have dropped 22 per cent since peaking on January 15. Yet, prices for refined products and profit margins for refiners have stayed relatively stable. This resilience is being driven, in part, by limited refining capacity, particularly in the US and Europe, which is tightening the supply of gasoline and diesel.

JPMorgan further noted that this situation is making markets more vulnerable to unexpected supply shocks. “Reduced refining capacity - mostly in the U.S. and Europe - is tightening gasoline and diesel balances, increasing reliance on imports and raising susceptibility to price spikes during maintenance and unplanned outages,” they added.

As market participants monitor both supply dynamics and trade developments, oil prices appear poised for limited near-term movement, with the next major shift likely to depend on clearer signals from either OPEC or U.S.-China negotiations.