WTI crude price rebounds to $63 but bearish forces cap upside potential
WTI crude climbs to $63 as traders cover shorts, but bearish risks limit further gains
West Texas Intermediate (WTI) crude oil futures rebounded above $63 per barrel on Tuesday, recovering from a sharp decline in the previous session. The move was largely attributed to technical short-covering, but analysts caution that underlying bearish factors remain intact, limiting the potential for a sustained rally.
During European trading hours, WTI traded near $63.30, up from Monday’s close near $62. Investors seized the opportunity to cover short positions following the 2% drop earlier this week. “Some short-covering emerged after Monday’s sharp sell-off,” noted Hiroyuki Kikukawa, chief strategist at Nissan Securities, while adding that the $55–$65 range is likely to define near-term price action.
USOIL price dynamics (March 2025 - April 2025) Source: TradingView.
Policy risks and Iran talks curb bullish enthusiasm
Market sentiment remains under pressure amid growing uncertainty around U.S. monetary policy. President Donald Trump intensified criticism of Federal Reserve Chair Jerome Powell on Monday, demanding immediate rate cuts to avert an economic downturn. The feud has sparked concerns about the Fed’s independence, clouding the macroeconomic backdrop and adding volatility to oil markets.
Adding to demand-side risks, a Reuters poll indicated that nearly 50% of investors now anticipate a US recession within the next 12 months. The probability is largely tied to the ongoing trade tensions and the economic damage inflicted by sweeping tariffs.
Meanwhile, diplomatic developments between the U.S. and Iran are also pressuring the oil market’s supply outlook. Over the weekend, both nations agreed to begin drafting a framework for a potential nuclear deal. Any agreement that lifts sanctions could pave the way for a return of Iranian oil exports, further easing supply-side constraints and weighing on global crude benchmarks.
OPEC+ supply increase complicates recovery path
Further complicating the recovery, OPEC+ is still expected to increase output by 411,000 barrels per day in May. Although some of this may be offset by compliance adjustments from overproducing nations, the overall supply addition could tilt the market further into surplus if demand growth continues to weaken.
In prior reports, we highlighted how crude markets remain vulnerable to geopolitical developments and shifting central bank policy. With traders now digesting progress on the Iran front and heightened U.S. political interference in monetary decisions, the risk of renewed downside pressure in oil remains elevated.
