WTI Rebounds but Tariff Concerns Limit Upside
Light crude oil futures climbed early Tuesday, bouncing off key support as traders covered shorts following Monday’s sharp selloff. West Texas Intermediate (WTI) broke above the critical pivot level at $63.06, setting the stage for a potential run toward last week’s high at $64.18.
A breakout beyond that level could open the path to $66.72—the 50-day moving average—and potentially $68.62, where the 200-day moving average sits. But any move back below $63.06 could signal fresh downside risk, with $59.33 acting as the next key support.
At 09:57 GMT, Light Crude Oil Futures are trading $63.51, up $1.10 or +1.76%.
Short-Covering Drives Gains, But Macro Risk Caps Rally
Tuesday’s rally was largely driven by short-covering after both WTI and Brent dropped more than 2% on Monday. That selloff was fueled by signs of progress in U.S.-Iran nuclear talks, which eased supply fears.
Hiroyuki Kikukawa of Nissan Securities said bargain-buying emerged, but noted that economic uncertainty stemming from U.S. tariffs continues to weigh on sentiment. Kikukawa expects WTI to remain rangebound between $55 and $65 due to persistent trade and policy-related concerns.
Fed Tensions and Recession Risks Press on Demand Outlook
Investor caution intensified after U.S. President Donald Trump again criticized Federal Reserve Chair Jerome Powell, urging immediate rate cuts. The remarks raised questions about Fed independence and rattled broader markets, with major U.S. equity indexes sliding and the dollar index hitting a three-year low.
Traders are growing increasingly wary that monetary policy instability could drag down U.S. growth—and by extension, crude oil demand. A Reuters poll put the probability of a U.S. recession within the next year at nearly 50%.
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See all Brent Oil forecastsIran Sanctions Relief Could Weigh on Supply Premium
Geopolitical headlines also pressured oil’s risk premium. The U.S. and Iran agreed over the weekend to start drafting a potential nuclear agreement, a move that could lead to eased sanctions and boost Iranian oil exports. Commonwealth Bank’s Vivek Dhar noted that risks to Iranian supply have diminished, which could further soften bullish pressure on crude markets.
Outlook: Cautiously Bearish as Recession, Iran Talks Loom
While technicals show WTI clinging to a near-term bullish setup above $63.06, the broader picture remains fragile. Trade tensions, Fed credibility issues, and Iranian supply developments are all acting as potential headwinds. Unless WTI clears $64.18 with conviction, the bias leans cautiously bearish, especially if risk-off sentiment deepens across financial markets.
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