During the Asian trading session on Tuesday, oil prices rebounded from a sharp 2% drop, mainly affected by global economic uncertainties stemming from U.S. trade tariffs and President Trump's push for Federal Reserve reform. Brent crude futures rose 0.8% to settle at $66.80 per barrel, while West Texas Intermediate (WTI) futures gained 1% to $63.02. Both had fallen over 2% on Monday after Iran and the U.S. agreed to begin expert-level discussions to design a potential nuclear agreement framework.
The clash between Trump and the Federal Reserve, along with concerns about tariffs leading to economic slowdown, kept markets cautious. White House economic advisor Kevin Hassett indicated that Trump and his team were considering whether they could dismiss Fed Chairman Powell. On Monday, Trump again called for the Fed to cut interest rates, warning that without immediate action, the U.S. economy might slow down. Powell stated last week that the central bank is not inclined towards a rate cut anytime soon, mentioning possible inflationary pressures and economic uncertainties arising from the new tariffs. Markets generally believe that a politically influenced Fed could increase market risks by making monetary policy more unpredictable, directly impacting the trajectory of commodities like oil and economic growth expectations.
Furthermore, Trump's escalation of trade tariffs, particularly against China, has further intensified concerns over a global economic slowdown. Slowing trade and manufacturing typically lead to reduced energy consumption, thus placing pressure on oil demand.
Markets are also assessing the progress of U.S.-Iran nuclear talks to predict oil supply prospects. A U.S.-Iran expert meeting is scheduled for Wednesday in Oman, with follow-up discussions expected on Saturday to evaluate negotiation progress. Advancements in the U.S.-Iran nuclear deal could signal the return of Iranian oil to the global market, increasing supply.
Additionally, eight OPEC+ member countries announced plans to accelerate production increases from May 1, raising daily output by 411,000 barrels, exceeding prior expectations, which has further softened market sentiment for crude oil.
