Oil prices saw a significant uptick after U.S. President Donald Trump indicated that he had no intention of removing Federal Reserve Chair Jerome Powell. This, coupled with a major drop in U.S. crude stockpiles, helped boost market confidence.
Brent crude prices surged toward $68 per barrel after closing 1.8% higher on Tuesday. Meanwhile, West Texas Intermediate (WTI) was trading around $64 per barrel following Trump’s comments, which calmed markets after his earlier criticism of Powell led to a global selloff on Monday. Despite the volatility, oil and other financial assets managed to recover some losses the next day.
Trump’s Comments Bring Stability to Markets
Chris Weston, head of research at Pepperstone Group Ltd. in Melbourne, stated, “Crude has benefited from a reduction in cross-asset volatility and the overall sense that we are avoiding a policy mistake amid Trump’s push for Powell’s early removal.” Investors had been concerned that the U.S. President’s attacks on Powell could lead to significant market instability. However, with Trump now signaling his support, the markets have found some stability.
Oil Rebounds Amid Geopolitical Tensions
In addition to Trump’s remarks, oil prices were also buoyed by rising expectations that Iranian oil exports could decline. This came after the U.S. imposed sanctions on Seyed Asadoollah Emamjomeh, a major liquefied petroleum gas magnate, and his corporate network. The Trump administration has previously emphasized its “maximum pressure” approach toward Iran, aiming to curb Tehran’s influence on the global oil market.
The sanctions on Iran have raised concerns about tighter global oil supplies, which could further support higher prices in the near term.
U.S. Crude Stockpiles See Significant Drop
A report from the American Petroleum Institute (API) revealed that U.S. crude inventories decreased by 4.57 million barrels last week. If confirmed by official government data later this week, this would mark the largest draw in U.S. crude stockpiles since November. A decline in stockpiles typically signals stronger demand and tighter supply, further supporting oil price increases.
Rising Tensions Cast Doubts on Global Economic Growth
Despite the short-term gains, concerns over the global economic outlook remain. Oil futures are still on track for a significant monthly loss, driven by fears that escalating trade tensions between the U.S. and its top trading partners could hinder economic growth and reduce energy demand.
In a closed-door meeting on Tuesday, U.S. Treasury Secretary Scott Bessent warned that the ongoing tariff conflict with China was unsustainable. He stressed that both countries would need to find ways to de-escalate the trade war to prevent long-term damage to the global economy.
Market Sentiment Shows Signs of Strength
Nevertheless, some market indicators suggest that the near-term outlook for oil may be stronger than expected. The forward curve for benchmark Brent crude has been in the widest backwardation since January, a bullish signal that suggests tighter oil supply in the market. This structure, where near-term prices are higher than those for later delivery, is often seen as an indicator of strong market demand and limited supply.
Mixed Outlook for Oil Prices
While oil prices have shown resilience amid geopolitical tensions and domestic inventory data, concerns about global economic growth continue to linger. Market participants are closely watching developments in the U.S.-China trade war and other geopolitical factors that could impact demand for oil.
As always, the oil market remains highly sensitive to political and economic shifts. With ongoing uncertainty, it will be crucial to monitor future developments closely to assess the potential for sustained price increases or further volatility.
