Crude oil prices climbed by about 2 per cent a barrel on Tuesday, lifted by a temporary cut in US-China tariffs and a better-than-expected inflation report.
The Brent crude grade was up by $1.67 or 2.57 per cent to $66.63 a barrel, and the US West Texas Intermediate (WTI) crude grade finished at $63.67 after gaining $1.72 or 2.78 per cent.
The US and China had recently agreed on sharp reductions to their import tariffs for at least 90 days, which has offered relief to the markets.
The US agreed to slash duties on Chinese goods to 30 per cent for the next 90 days while tariffs on US goods imported into China would decline to 10 per cent from 125 per cent.
Further supporting the market, the US Labor Department reported on Tuesday that the Consumer Price Index rose 2.3 per cent in the 12 months through April, the smallest year-over-year gain in four years.
The Consumer Price Index increased 0.2 per cent last month after dipping 0.1 per cent in March, which was the first decline since May 2020, the Labor Department’s Bureau of Labor Statistics said.
The data suggested price pressures were cooling before President Donald Trump’s chaotic tariffs policy and did not change economists’ views that the Federal Reserve would continue to pause its interest rate-cutting cycle until late in the summer.
The US central bank has paused its rate cuts amid concerns that the trade war could reignite inflation. It kept its benchmark interest rate unchanged since last cutting it in December.
This development has also led banks like JPMorgan Chase and Barclays to cut their forecasts of a US recession in the coming months.
On the supply front, the Organization of the Petroleum Exporting Countries and its allies (OPEC+), are planning to boost oil exports in May and June, which is seen as possibly limiting oil’s upside.
OPEC has raised oil output by more than previously expected since April, with its May output likely to increase by 411,000 barrels per day.
Reuters reported that Saudi Arabia’s crude oil supply to China will hold steady in June after hitting its highest level in more than a year in the previous month after an OPEC+ decision to increase output.
Market analysts, however, warned that if China talks stall or supply outpaces refining capacity, the recent rally could be short-lived.