Oil prices were largely flat on Tuesday as the market weighed brimming global supplies against the prospect of new U.S. sanctions against Iran. A report in early May that U.S.-China tensions were easing lifted investor sentiment temporarily. There is still doubt whether this truce will end in a trade deal, leaving oil markets on a cautious footing.
Brent crude futures were up 9 cents at $65.05 a barrel, and U.S. oil gained 11 cents to end at $62.06. The minor advances came after a strong day on Monday when both benchmarks jumped more than 4%. That initial surge was prompted by news of the easing of tariffs between Washington and Beijing for at least 90 days, with the same positive effect on Wall Street.
But analysts caution that the positive sentiment may be short-lived. Tamas Varga of PVM Oil Associates warned that the recent market rally could fade. “With a strong increase in OPEC+ production expected over the coming months, the upside potential may soon run out,” he said.
The Organization of the Petroleum Exporting Countries (OPEC) has already raised output by more than anticipated since April. Reports indicate that oil production in May alone could be more than 400,000 barrels a day higher. This additional supply may cap price growth, especially if demand does not pick up to absorb it.
Refined fuel markets remain resilient despite global demand concerns. Gasoline and diesel prices have stayed strong. Pretax earnings from this month through June totaled $900 million, according to Jason Gammel, an energy analyst at Jefferies. A key factor is the reduced refining capacity in regions such as the U.S. and Europe.
With some refineries shut down for maintenance or due to unplanned outages, gasoline and diesel markets have become tighter. This shortfall is driving increased imports, raising the risk of price spikes if supply disruptions persist.
Experts also note that this straitened refining environment leaves the market erring with volatility. “The pressure on refining systems is such that any small hiccup can rapidly lead to price implications,” JPMorgan analysts said.
Additionally, the U.S. continues to face concerns regarding future energy policy, which is contributing to further market anxiety. Political opposition to alternative energy projects, like offshore wind, has spooked some investors and added to market instability.
For now, oil prices may well remain stuck in a tight range as the market waits for clearer signals on supply, demand, and global trade talks.
