Oil prices hold gains as U.S.-China truce lifts sentiment but OPEC output weighs on outlook
WTI crude trades near resistance as U.S.-China truce lifts sentiment but supply risks persist
WTI crude oil futures edged higher to $62.5 per barrel on Tuesday, extending their rally for a fourth straight session and hitting a two-week high. The latest boost followed a 90-day tariff truce between the United States and China, easing fears of an imminent trade war between the two largest oil consumers.
However, traders remain cautious, balancing hopes of demand recovery against rising supply from OPEC+ producers and technical resistance near key moving averages.
USOIL price dynamics (October 2024 - May 2025) Source: TradingView.
Mixed drivers challenge bullish continuation
Monday’s 1.5 percent jump in crude prices was driven by broad risk-on sentiment after the tariff suspension. Analysts at ING described the move as a “larger-than-expected de-escalation,” sparking rallies in oil, equities, and the U.S. dollar. But even as trade tensions ease, remarks from Fed officials suggested reduced urgency for rate cuts, casting some doubt on sustained demand acceleration.
Technical resistance is another headwind. Light crude futures are testing the 50-day moving average near $63.80. A breakout from this level could extend gains to the April 23 high of $64.87 and potentially the 200-day moving average at $67.61. For now, price support is anchored between $60.09 and $59.68.
OPEC output rise tempers optimism
Despite trade-driven bullish momentum, fundamentals in the oil market remain complex. OPEC production is expected to rise by 411,000 barrels per day in May, driven by Saudi Arabia’s pressure on underperforming members and stable exports to China. Meanwhile, Iraq and the Black Sea’s CPC Blend are showing slight reductions, and Mexico’s Pemex may divert overseas shipments to domestic facilities.
Adding to the supply-side story, refined fuel markets remain firm. Stable refining margins and tighter capacity in the U.S. and Europe are helping offset weakness in crude benchmarks. Outages such as Equinor’s Johan Castberg facility are also lending temporary support.
As previously discussed, WTI crude’s recovery has been driven by temporary optimism in demand sentiment, but the structural headwinds from surplus supply and production adjustments continue to limit strong bullish continuation. Unless prices break and close above the $64.87 level, oil is likely to remain rangebound, awaiting clearer cues from both trade policy and inventory trends.
