- Crude oil prices saw a whopping 6% gain on Thursday.
- Easing trade worries, Middle East tension, and falling inventories helped the price reverse bearish momentum.
- A weaker dollar after cooler US CPI also supported oil prices.
The crude oil prices rose to a fresh 2-month top on Thursday before a slight pullback. The prices soared more than 6% on the day, which is the second-largest gain in a single day in the last few months. The prices have been under strong selling pressure for the last six months or more due to trade tariffs, geopolitics, and potentially increased supply by the OPEC+.
With Israel’s intent to attack Iran anytime, the escalated tension has pushed the oil prices higher as the supply may be disrupted due to war. According to media reports, Israel is planning to attack the nuclear facilities of Iran, while President Trump has also now shown no interest in signing a nuclear deal with Iran. It means the odds of de-escalating the tension are low.
The latest US-China trade talks also provided optimism for oil prices, as demand could potentially drift higher. Although the trade talks yielded no clear results, they were not entirely negative and left some room for positive development. The oil prices marked a 5-year low on May 5, 2025, and since then they have gained around 18%.
Global economic activity experienced a significant decline after the tariffs were imposed on April 2. From car booking to shipments, everything experienced a strong pressure as the Chinese goods faced a huge tariff barrier. However, now that the easing of trade tensions has given some fresh air to buyers.
Moreover, the recent US inventory data showed a significant decline in the crude oil stock, which reinforced the odds of a tightening supply. It means the demand for crude has ticked up recently, perhaps due to easing trade worries worldwide.
Also, the weaker-than-expected US inflation data on Wednesday weighed on the dollar, which also supported the energy prices. A falling inflation means the Fed can be expected not to keep the rate too high for too long. According to CME FedWatch tool, the rate cut probability in September has increased to 60% from the previous 50%.
