Oil prices increase due to short-covering, but tariff worries persist

Oil prices rose in early trading on Tuesday as investors sought to capitalize on the losses from the previous day by covering short positions. However, worries remained regarding economic challenges posed by tariffs and U.S. monetary policy, which could potentially suppress fuel demand.

Brent crude futures increased by 51 cents, or 0.8%, reaching $66.77 a barrel at 0045 GMT. Meanwhile, U.S. West Texas Intermediate crude was priced at $63.59 a barrel, also up by 51 cents, or 0.8%.

On Monday, both benchmarks fell by over 2% as indications of advancement in nuclear deal discussions between the U.S. and Iran emerged, alleviating supply worries.

“Following Monday’s significant sell-off, there was a noticeable emergence of short-covering,” stated Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a division of Nissan Securities.

“Nonetheless, worries regarding a possible recession stemming from the tariff conflict continue,” he stated, forecasting that WTI will probably fluctuate between $55 and $65 for the moment due to the persistent uncertainty surrounding tariffs.

On Monday, U.S. President Donald Trump reiterated his criticism of Federal Reserve Chair Jerome Powell, stating that the U.S. economy might experience a slowdown unless interest rates were reduced without delay.

His remarks regarding Powell heightened concerns about the Fed’s autonomy in determining monetary policy and the future of U.S. assets. On Monday, major U.S. stock indexes experienced a decline, while the dollar index fell to its lowest point in three years.

“Kikukawa noted that the increasing uncertainty regarding U.S. monetary policy is anticipated to adversely affect financial markets and the overall economy, heightening concerns that it may result in a decrease in crude oil demand.”

A Reuters poll conducted on April 17 revealed that investors anticipate the tariff policy will lead to a notable slowdown in the U.S. economy this year and the next, with the median probability of a recession within the next 12 months nearing 50%. The United States holds the title of the largest oil consumer globally.

In the meantime, Russia’s economy ministry has revised its forecast for the average price of Brent crude in 2025, lowering it by almost 17% compared to its September estimates, as per documents acquired by Reuters.

A preliminary Reuters poll indicated that U.S. crude oil and gasoline stockpiles were anticipated to have decreased last week, while distillate inventories were likely to have increased. This comes ahead of the weekly reports from the American Petroleum Institute and the Energy Information Administration.