West Texas Intermediate (WTI) crude oil prices saw modest gains during Tuesday’s Asian trading session, though the upward movement lacks clear momentum. Currently hovering around $62.80-$62.85, the commodity has risen by just over 0.30% for the day, still well below the two-week high reached last Friday.
One of the key factors behind the limited price movement is the easing of supply concerns following progress in nuclear deal negotiations between the US and Iran. On Saturday, the US and Iran agreed to begin expert-level discussions aimed at crafting a framework for a potential nuclear agreement. These discussions are scheduled for Wednesday, with a follow-up meeting set for Saturday to review the progress. This shift in sentiment has helped alleviate some concerns over crude oil supply, contributing to a decline in prices.
Additionally, fears of a full-scale trade war triggering a global recession have weighed on the outlook for fuel demand, further capping oil price gains. However, geopolitical risks related to the ongoing Russia-Ukraine conflict continue to support oil prices, with the associated risk premium still in play. The prevailing bearish sentiment surrounding the US Dollar also provides a supportive environment for USD-denominated commodities like crude oil.
Meanwhile, former President Donald Trump has criticized Federal Reserve Chairman Jerome Powell for not acting swiftly enough to reduce interest rates. The White House has also suggested that Trump and his team are considering whether to attempt to remove Powell, raising concerns over the independence of the Federal Reserve. This situation, coupled with waning investor confidence in the US economy, has failed to prompt a meaningful recovery in the US Dollar, which recently hit a three-year low.
Given the complex and mixed economic landscape, market participants are advised to exercise caution before making aggressive bets on crude oil. Traders may look to Wednesday’s release of flash Purchasing Managers’ Index (PMI) data for insights into global economic health, which could offer more clarity on the market’s next move.
