IG market strategist says ‘persistent headwinds and uncertain demand amid US tariff risks are weighing on prices’
06 May 2025 - 08:22
bySiyi Liu
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Singapore — Oil prices rebounded more than 1% on Tuesday with technical rebound and dip buying after a drop in previous session by Opec+ decision to accelerate increases in output, though concerns about the market surplus outlook persisted.
Brent crude futures rose 92c to $61.15 a barrel by 3.09am GMT, while US West Texas Intermediate (WTI) crude added 89c to $58.02 a barrel.
Both benchmarks had settled at their lowest since February 2021 on Monday, driven by an Opec+ decision over the weekend to further speed up oil production hikes for a second consecutive month.
“Today’s slight rebound in oil prices appears more technical than fundamental,” said Yeap Jun Rong, a market strategist at IG. “Persistent headwinds including a pivotal shift in Opec+ production strategy, uncertain demand amid US tariff risks, and price forecast downgrades are continuing to weigh on the broader price movement.”
Driven by the expectation that production will exceed consumption, oil has lost more than 10% in six consecutive sessions and dipped over 20% since April when US President Donald Trump’s tariff shocks prompted increased bets on a slowdown in the global economy.
The return of Chinese market participants after a five-day public holiday since May 1 was seen supporting prices on Tuesday.
“China also reopened today, and being the largest importer, buyers would have likely jumped to secure oil at current low levels,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Also lending some support was data showing a pickup in services sector’s growth in the US, the world’s major oil consumer, as orders increased.
The Institute for Supply Management (ISM) said on Monday its nonmanufacturing purchasing managers index (PMI) increased to 51.6 last month from 50.8 in March. Economists polled by Reuters had forecast the services PMI dipping to 50.2.
The US Federal Reserve will likely leave interest rates unchanged on Wednesday as tariffs roil the economic outlook.
Barclays lowered its Brent crude forecast on Monday by $4 to $70 a barrel for 2025 and set its 2026 estimate at $62 a barrel, citing “a rocky road ahead for fundamentals” amid escalating trade tensions and Opec+’s pivot in its production strategy.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil rises after price drop spurs buying
IG market strategist says ‘persistent headwinds and uncertain demand amid US tariff risks are weighing on prices’
Singapore — Oil prices rebounded more than 1% on Tuesday with technical rebound and dip buying after a drop in previous session by Opec+ decision to accelerate increases in output, though concerns about the market surplus outlook persisted.
Brent crude futures rose 92c to $61.15 a barrel by 3.09am GMT, while US West Texas Intermediate (WTI) crude added 89c to $58.02 a barrel.
Both benchmarks had settled at their lowest since February 2021 on Monday, driven by an Opec+ decision over the weekend to further speed up oil production hikes for a second consecutive month.
“Today’s slight rebound in oil prices appears more technical than fundamental,” said Yeap Jun Rong, a market strategist at IG. “Persistent headwinds including a pivotal shift in Opec+ production strategy, uncertain demand amid US tariff risks, and price forecast downgrades are continuing to weigh on the broader price movement.”
Driven by the expectation that production will exceed consumption, oil has lost more than 10% in six consecutive sessions and dipped over 20% since April when US President Donald Trump’s tariff shocks prompted increased bets on a slowdown in the global economy.
The return of Chinese market participants after a five-day public holiday since May 1 was seen supporting prices on Tuesday.
“China also reopened today, and being the largest importer, buyers would have likely jumped to secure oil at current low levels,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Also lending some support was data showing a pickup in services sector’s growth in the US, the world’s major oil consumer, as orders increased.
The Institute for Supply Management (ISM) said on Monday its nonmanufacturing purchasing managers index (PMI) increased to 51.6 last month from 50.8 in March. Economists polled by Reuters had forecast the services PMI dipping to 50.2.
The US Federal Reserve will likely leave interest rates unchanged on Wednesday as tariffs roil the economic outlook.
Barclays lowered its Brent crude forecast on Monday by $4 to $70 a barrel for 2025 and set its 2026 estimate at $62 a barrel, citing “a rocky road ahead for fundamentals” amid escalating trade tensions and Opec+’s pivot in its production strategy.
Reuters
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