Oil prices bounced back sharply on Tuesday, climbing roughly 3%, following signs of stronger energy demand in Europe and China and a decline in U.S. oil production. Brent crude settled at $62.15 a barrel and WTI closed at $59.09, both recovering from four-year lows hit just a day earlier. Analysts suggested the rally was driven partly by short sellers locking in profits and a wave of bottom-fishing by investors expecting a market correction.
Much of the momentum came from global demand signals, particularly as Chinese consumers increased travel and spending during the May Day holiday, and Europe showed signs of energy consumption picking up. Meanwhile, geopolitical tensions in the Middle East, including Israeli strikes on Iran-backed Houthi targets in Yemen, added a risk premium to oil prices. The White House, under President Trump, said it would cease bombing campaigns in Yemen after the Houthis pledged to stop disrupting major shipping routes.
On the supply side, the rebound also came amid expectations of lower U.S. output. Companies like Diamondback Energy and Coterra Energy are scaling back operations due to recent price declines, which may tighten domestic supply. In contrast, OPEC+ has moved to increase production for a second month, a decision that initially drove prices down but is now being reevaluated in light of improving demand and geopolitical risk factors.
Adding to the bullish sentiment, a weaker U.S. dollar—down to a one-week low—made oil more attractive to foreign buyers. Analysts are also anticipating a drop in U.S. crude stockpiles by about 800,000 barrels, which, if confirmed, would support the idea of tightening supply. With traders now looking past OPEC+ output moves and focusing on real-time demand trends and inventory shifts, the oil market appears to be recalibrating after weeks of volatility.
Source: Business Day