Oil Up 1% as Dip Attracts Buyers, But Oversupply Concerns Linger

SINGAPORE: Oil prices rose more than 1 per cent on Tuesday due to a technical rebound and dip buying following a decline in the previous session caused by OPEC+'s decision to speed up output increases, even as worries about the market surplus outlook continued. Brent crude futures increased by 92 cents to $61.15 per barrel by 0309 GMT, whereas U.S. West Texas Intermediate crude climbed 89 cents to $58.02 a barrel. On Monday, both benchmarks reached their lowest points since February 2021, influenced by an OPEC+ decision over the weekend to accelerate oil production increases for the second month in a row. "Yeap Jun Rong, a market strategist at IG, stated that today's modest recovery in oil prices seems to be more technical than based on fundamentals."

"Continuing challenges such as a crucial change in OPEC+ production strategy, uncertain demand due to U.S. tariff threats, and lowered price forecasts are impacting the wider price trend." Fueled by forecasts that output will surpass usage, oil has declined more than 10 per cent for six consecutive sessions. It has fallen over 20 per cent since April, when U.S. President Donald Trump's tariff surprises led to heightened speculations about a global economic slowdown. The resurgence of Chinese market participants following a five-day public holiday that ended on May 1 was observed to bolster prices on Tuesday. "China reopened today, and as the largest importer, buyers probably rushed to lock in oil at the current low prices," stated Priyanka Sachdeva, senior market analyst at Phillip Nova.

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Also contributing to the support was information indicating a rise in the growth of the services sector in the U.S., the world's largest oil consumer, as orders grew. On Monday, the Institute for Supply Management (ISM) announced that its non-manufacturing purchasing managers index (PMI) rose to 51.6 last month, up from 50.8 in March. Economists surveyed by Reuters predicted that the PMI of services would decline to 50.2. The U.S. Federal Reserve is expected to keep interest rates steady on Wednesday as tariffs disrupt the economic forecast. On Monday, Barclays reduced its Brent crude forecast for 2025 by $4 to $70 per barrel and projected a price of $62 per barrel for 2026, noting "a challenging path for fundamentals" due to rising trade tensions and OPEC+'s shift in its production approach.