As always with volatile markets, it’s important not to read too much into a single-day reversal.
Tuesday’s rebound came after hitting four-year lows on Monday. The rally, driven by technical buying and bargain hunting, followed a selloff triggered by OPEC+’s decision to triple its production increase to 411,000 bpd in June. Traders capitalized on oversold conditions, with Brent’s $60 level acting as a psychological floor, prompting speculative long positions. Additionally, China’s robust post-Labour Day travel spending, up 8% year-on-year to $24.92 billion, fueled optimism for fuel demand, particularly in jet fuel and gasoline. However, this bounce reflects short-term market dynamics rather than a fundamental shift, as oversupply fears and trade war concerns linger.
Analysts suggest the actual output increase may be tempered by overproduction from members like Kazakhstan, already 390,000 bpd above its quota, and compensatory cuts. Meanwhile, a stronger U.S. dollar and potential U.S.-China trade tariffs threaten demand, with the IEA forecasting only 1.2 million bpd growth in 2025. The contango structure in futures markets and high volatility driven by short-covering underscore that this is a trader’s market, not a signal of sustained recovery. Without clearer demand signals or tighter supply, any significant rally is more likely to be bargain hunting than a reversal of the bearish trend.
