On Tuesday (May 13), the crude oil market continued its strong upward trend, with crude oil futures in New York and London rising for the fourth consecutive trading day. Market sentiment significantly recovered, mainly due to a breakthrough in US-China trade negotiations—both sides agreed to suspend the imposition of new tariffs for 90 days, providing a valuable window for the world's two largest economies to resolve trade disputes. This news effectively alleviated concerns about weak energy demand, coinciding with a gradual increase in production by OPEC+, improving the supply-demand balance and boosting oil prices.
Stimulated by the positive news, WTI crude futures rose 2.8% on Tuesday, to $63.67 per barrel, while Brent crude futures increased 2.6%, closing at $66.63 per barrel, both recording the largest four-day gains since last October. Previously, both benchmark contracts surged 4% in a single day after the announcement of the tariff pause, leading to a simultaneous strengthening of the three major US stock indices and the dollar index.
Multiple Positive Factors Drive Oil Prices Higher
Several positive factors have intertwined, forming a strong market reaction. The latest data from the US Department of Labor shows that the year-on-year increase in the consumer price index (CPI) for April narrowed to 2.3%, a four-year low. The easing inflation pressure prompted institutions like JPMorgan Chase and Barclays to lower their predictions for a US economic recession, reigniting market speculation about the timing of the Federal Reserve's rate cuts. Analysts believe that the easing of trade disputes and the softening of inflation provide room for adjustments in the Fed's monetary policy.
On the geopolitical front, the Trump administration has sent a strong signal to Iran, stating that if a new nuclear agreement cannot be reached, "maximum pressure" will be applied. This statement triggered concerns about the stability of Middle Eastern supply, further driving up oil prices. Meanwhile, the US Congress's Republican proposal of a budget plan that includes $1.3 billion to replenish the strategic petroleum reserve also boosted bullish sentiment.
Positive Signals from the Demand Side
Despite persistent uncertainties in the outlook for crude oil demand, the performance of the refined oil market remains robust. A report by JPMorgan noted that even though international oil prices have retreated 22% since peaking on January 15, the prices of refined products like gasoline and diesel, as well as refining margins, have remained stable. The institution stated that continued reductions in refining capacity in the US and Europe leading to tightened gasoline and diesel supplies, equipment maintenance, or unexpected outages could cause significant price fluctuations, further supporting expectations for rising oil prices.
Overall, the crude oil market is experiencing a confluence of multiple positive factors. With the easing of US-China trade disputes, improved supply expectations, and strong demand for refined products, the market's optimistic sentiment towards oil prices has increased, with a continued upward trend in oil prices expected in the coming period.
