Oil prices have risen, but this is likely to be short-lived
22 April 2025 08:02
Oil prices climbed on Tuesday as investors took advantage of yesterday’s drop to cover short positions. However, concerns about economic disruptions caused by tariffs and US monetary policy, which could reduce demand for fuel, remain relevant. This is reported by "Komersant Ukrainian" with reference to Reuters.
Futures for Brent crude oil rose by 36 cents (0.5%) to $66.62 per barrel as of 06:21 Kyiv time. The May contract for US West Texas Intermediate (WTI), which expires on Tuesday, reached $63.73 per barrel, up 65 cents (1%).
The June WTI contract, which is more actively traded, rose by 0.7% (43 cents) to $62.84 per barrel.
Both benchmark crudes fell more than 2% on Monday as signs of progress in the US-Iran nuclear deal talks helped ease supply concerns.
“After a sharp sell-off on Monday, there was some covering of short positions. However, concerns about a potential recession caused by the tariff war remain,”
– said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, a division of Nissan Securities.
At the same time, the expert predicted that WTI is likely to trade in the range of $55-65 in the near future, given the current uncertainty associated with tariffs.
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Factor: US monetary policy
On Monday, US President Donald Trump repeated his criticism of Federal Reserve Chairman Jerome Powell and said that the US economy could slow down if interest rates are not immediately cut.
His comments on Powell increased concerns about the Fed’s independence in determining monetary policy and the outlook for US assets. Major US stock indices fell, and the dollar index dropped to a three-year low on Monday.
“The growing uncertainty surrounding US monetary policy is expected to weigh on financial markets and the broader economy, increasing concerns that it could lead to a decline in demand for crude oil,”
– Kikukawa said.
Investors believe that the tariff policy will cause a significant slowdown in the US economy this year and next, with the average probability of a recession over the next 12 months approaching 50%.
The US is the largest oil consumer in the world.
According to preliminary data on Monday, US crude oil and gasoline stockpiles likely declined last week, while distillate stockpiles likely rose.
Factor: U.S.-Iran talks
Progress in talks between the US and Iran, which agreed on Saturday to begin drafting a framework agreement for a potential nuclear deal, could also impact oil prices and ease supply concerns as the Middle Eastern country is a major producer.
“Our concerns that Iran’s oil exports face imminent downside risks due to US sanctions have eased given the ongoing talks between the US and Iran,”
– said Vivek Dhar, an analyst at Commonwealth Bank of Australia.
He added that the possibility of lifting US sanctions is potentially being considered.
Meanwhile, according to documents obtained by Reuters, the Russian Ministry of Economy has lowered its forecast for the average price of Brent crude oil in 2025 by almost 17% compared to its calculations made in September.
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