Oil Prices Rebound Amid Market Volatility and Economic Uncertainty

Oil prices edged higher on Tuesday following a sharp drop in the previous session, as investors moved to cover short positions. However, economic concerns linked to U.S. monetary policy and trade tensions continued to weigh heavily on the outlook for global fuel demand.

Brent crude futures rose by 42 cents, or 0.6%, reaching $66.68 a barrel by 9:20 a.m. Saudi time. U.S. West Texas Intermediate (WTI) crude for May delivery, which expires Tuesday, climbed 45 cents, or 0.7%, to $63.53. The more actively traded June WTI contract also gained 0.7%, trading at $62.86 per barrel.

The rebound follows a more than 2% drop in both benchmarks on Monday, spurred by easing concerns over supply disruptions amid signs of progress in nuclear talks between the United States and Iran. The diplomatic developments raised the possibility of Iranian oil returning to global markets should U.S. sanctions be lifted.

“Some short-covering emerged after Monday’s sharp sell-off,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment. “But concerns about a potential recession driven by the tariff war persist.” He noted that WTI could remain in the $55–$65 range for the foreseeable future due to ongoing economic uncertainty.

Markets were also rattled by renewed criticism from U.S. President Donald Trump, who on Monday again called on the Federal Reserve to cut interest rates immediately. Trump’s comments targeting Fed Chair Jerome Powell have raised concerns over the central bank’s independence and the stability of U.S. monetary policy.

As a result, U.S. stock indexes fell, and the dollar slipped to a three-year low, further contributing to market jitters. Kikukawa warned that uncertainty surrounding monetary policy could dampen oil demand by slowing economic growth.

A Reuters poll conducted on April 17 showed that nearly half of investors now believe a U.S. recession is likely within the next 12 months, largely due to the ongoing tariff dispute and its impact on business confidence and investment.

Meanwhile, diplomatic developments involving Iran continue to influence the energy market. Talks between Washington and Tehran have reportedly moved toward drafting a new nuclear agreement, which could ease sanctions and potentially increase Iran’s oil exports. “Our view that Iran’s oil exports face imminent downside risks has eased,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia.

In a related development, Russia’s economy ministry has lowered its forecast for the average Brent crude price in 2025 by nearly 17% compared to earlier estimates, reflecting global market uncertainties.

Additionally, U.S. crude and gasoline inventories were expected to have declined last week, while distillate stocks likely rose, according to preliminary data ahead of reports from the American Petroleum Institute and the Energy Information Administration.