Oil Rebounds, Jumps Up to 5% Following Tariff Pause
Oil prices reversed early losses and surged as much as 5% on Wednesday, after U.S. President Donald Trump authorized a 90-day pause on reciprocal tariffs and a reduced 10% duty, both taking immediate effect.
Both Brent crude and West Texas Intermediate (WTI) rebounded sharply after hitting lows not seen since early 2021. Brent rose 4.5% to $65.71 per barrel, while WTI climbed 5.1% to $62.63.
Trump announced the tariff pause as part of a broader trade strategy, while simultaneously imposing a new 125% tariff on Chinese imports, also effective immediately.
OPEC+ Surprise Decision Adds to Volatility
Adding to the geopolitical uncertainty, OPEC+ unexpectedly announced an increase in oil production starting in May. The cartel will raise output by 411,000 barrels per day, fast-tracking part of its gradual supply normalization plan.
The size of the hike — equivalent to three months’ worth of phased increases — has raised concerns among market participants that the market could be flooded with supply just as demand shows signs of weakness.
This creates a perfect storm for oil prices: fears of a tariff-induced recession combined with a significant supply boost from producers. The scale of the recent drop in oil suggests that markets are increasingly pricing in a higher probability of recession.
The combination of an escalating trade war and a sudden supply surge creates an extremely volatile environment for the energy market, which now faces a delicate balancing act between supply, demand, and geopolitical risk.
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