Oil prices rose on Tuesday, but gains were limited by concerns over rising supplies and uncertainty about how long a trade truce between the United States and China will last.
Brent crude futures climbed 65 cents, or about 1%, to $65.61 a barrel by midday in London. U.S. West Texas Intermediate crude gained 72 cents, or about 1.2%, to $62.67. Both benchmarks had jumped about 4% or more in the previous session after the U.S. and China agreed to sharply reduce tariffs for at least 90 days.
That news also boosted Wall Street and strengthened the dollar.
The oil market is now watching how the temporary trade deal plays out. At the same time, a large increase in oil output is expected from OPEC and its allies in May and June, which could limit further price gains.
OPEC has been raising production more than expected since April, with May output likely to rise by over 400,000 barrels per day. Saudi Arabia’s oil supply to China is expected to remain steady in June after reaching a high in May. Saudi Arabia is China’s second-largest crude supplier after Russia.
Despite concerns about weaker crude demand, demand for refined fuels like gasoline and diesel remains strong. Prices for these products and profit margins for refiners have stayed firm, even as crude oil prices have dropped 22% since peaking in January.
Reduced refining capacity in the U.S. and Europe has made fuel markets tighter, increasing reliance on imports and raising the risk of price spikes during maintenance periods or unexpected shutdowns.
