Crude oil prices recover 13% from May lows to reach 2-week high. What's fueling the rebound?
Brent crude futures retreated in Wednesday's session, dropping 0.72% to a low of $66.15 per barrel. However, they have recovered nearly 12% from the May 5 low of $59.57 to trade at 2-week high of $66.49. Likewise, WTI crude futures have reached 2-week high of $63.5 per barrel after rebounding nearly 13% from the May 5 low of $56.46.
The majority of the rebound in crude oil prices has been driven by optimism over easing global trade tensions, which has boosted expectations that demand for crude oil may not be as severely impacted as feared earlier this month. The U.S. is currently engaged in active discussions with several major trading partners to finalize trade deals, the latest being announced with China and the United Kingdom.
The U.S. and the U.K. struck a trade deal last week, and optimism improved further when the U.S. and China announced on Monday a 90-day pause in their trade war. This pause involves rolling back reciprocal tariffs and removing other measures while they negotiate a more permanent arrangement.
Overnight data showed softer-than-expected U.S. consumer inflation, sending the U.S. dollar down by 1%. The dollar is currently hovering around the 100 mark, making dollar-denominated commodities more attractive.
Data released Tuesday showed headline inflation eased to 2.3% in April, its lowest level since February 2021, and slightly below market forecasts of 2.4%.
With U.S. inflation data now behind the markets, the next major signal for the U.S. economy is April retail sales data, due Thursday. On the same day, talks are scheduled between Ukraine and Russia in Istanbul, raising hopes for a ceasefire three years into Europe's deadliest conflict since World War Two.
On Tuesday, the U.S. imposed fresh sanctions on about 20 companies it accused of helping Iran's Armed Forces General Staff and its front company, Sepehr Energy, ship Iranian oil to China. The move follows the fourth round of U.S.-Iran talks in Oman aimed at resolving disputes over Iran's nuclear program.
API data showed that crude inventories surged by 4.29 million barrels last week—the largest increase in six weeks—defying forecasts of a 2.4-million-barrel drop. However, gasoline inventories fell by 1.4 million barrels, while distillate stocks declined by 3.7 million barrels.
Meanwhile, earlier this month, Organization of the Petroleum Exporting Countries (OPEC) has raised oil output by more than previously expected since April, with May output likely to increase by 411,000 barrels per day.
Meanwhile the market is also closely watching U.S. President Donald Trump's Gulf visit, which began Tuesday with an appearance at an investment forum in Riyadh. There, he announced the lifting of longstanding U.S. sanctions on Syria and secured a $600 billion pledge in Saudi investment.
(With inputs from Reuters)
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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