Oil prices climbed in early trade on Tuesday as investors took advantage of the previous day’s losses to cover short positions, although concerns persisted over economic headwinds from tariffs and U.S. monetary policy that could dampen fuel demand.
Brent crude futures rose 51 cents, or 0.8%, to $66.77 a barrel at 0045 GMT, while U.S. West Texas Intermediate crude was at $63.59 a barrel, up 51 cents, 0.8%.
Both benchmarks dropped more than 2% on Monday on signs of progress in nuclear deal talks between the U.S. and Iran, helping ease supply concerns.
“Some short-covering emerged after the Monday’s sharp sell-off,” said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities.
“However, concerns about a potential recession driven by the tariff war persist,” he said, predicting that WTI will likely trade in the $55–$65 range for the time being amid ongoing uncertainty related to tariffs.
On Monday, U.S. President Donald Trump repeated his criticism of Federal Reserve Chair Jerome Powell and said the U.S. economy could slow unless interest rates were lowered immediately.
His comments about Powell fuelled worries about the Fed’s independence in setting monetary policy and about the outlook for U.S. assets. Major U.S. stock indexes dropped and the dollar index slid to a three-year low on Monday.
“The growing uncertainty surrounding U.S. monetary policy is expected to negatively impact on financial markets and the broader economy, raising fears that it could lead to a decline in crude oil demand,” Kikukawa said.
A Reuters poll on April 17 showed investors believe the tariff policy will trigger a significant slowdown in the U.S. economy this year and next, with the median probability of recession in the next 12 months approaching 50%. The U.S. is the world’s biggest oil consumer.
Meanwhile, Russia’s economy ministry has cut its forecast for the average price of Brent crude in 2025 by nearly 17% from what it saw in its September calculations, according to documents obtained by Reuters.
U.S. crude oil and gasoline stockpiles were expected to have fallen last week, while distillate inventories likely rose, a preliminary Reuters poll showed on Monday, ahead of weekly reports from the American Petroleum Institute and the Energy Information Administration.
(Reporting by Yuka Obayashi; Editing by Sonali Paul)