By Shariq Khan
NEW YORK (Reuters) -Oil prices settled more than $1 per barrel higher on Tuesday as new U.S. sanctions against Iran and rising equity markets helped spark a recovery rally from the prior session’s steep selloff.
Brent crude futures rose $1.18, or 1.8%, to settle at $67.44 per barrel. The U.S. West Texas Intermediate crude contract for May, which expired on Tuesday’s settlement, gained $1.23, or 2%, to close at $64.32.
The more actively traded WTI June contract also gained 2% to settle at $63.47.
Brent and WTI fell more than 2% on Monday as the United States and Iran signalled progress in talks over the latter’s nuclear program, and as stock markets sold off sharply on U.S. President Donald Trump’s criticism of Federal Reserve Chair Jerome Powell.
On Tuesday, the U.S. issued fresh sanctions targeting an Iranian liquefied petroleum gas and crude oil shipping magnate and his corporate network.
Despite progress in its talks with the U.S., failure to reach a deal could weigh heavily on Iran’s oil exports amid tightening U.S. sanctions, said John Kilduff, partner at New York-based Again Capital.
"Either some nuclear deal is agreed or the U.S. tries to drive Iran’s oil flows to zero, and it’s increasingly looking like a zero-flow scenario," Kilduff said.
Meanwhile, equity markets also rebounded on Tuesday on signs of a potential de-escalation in U.S.-China trade tensions.
U.S. Treasury Secretary Scott Bessent on Tuesday said that he believes trade tensions between the U.S. and China will de-escalate, although he cautioned talks with Beijing have not started and will be a "slog".
Washington’s standoff with Beijing, and tariffs on virtually all U.S. trading partners, have weighed heavily on oil prices in recent weeks as investors expressed concerns of a potential global economic slowdown that would severely erode oil demand.
The International Monetary Fund on Tuesday slashed its economic outlook for this year, while global finance chiefs swarmed Washington seeking deals with Trump’s team to lower tariffs.
"(U.S. tariffs) risk slowing global trade, disrupting supply chains, and increasing costs across major energy-consuming industries - all of which could significantly dampen oil demand," said Marcus McGregor, head of commodities research for asset management firm Conning.
On the supply front, {{8849|U.S. crcrude oil inventories fell by nearly 4.6 million barrels last week, market sources said on Tuesday citing American Petroleum Institute data. [API/S]
U.S. government data on stockpiles is due at 10:30 a.m. ET (1430 GMT) on Wednesday. Analysts polled by Reuters expect, on average, an 800,000 barrel decline in U.S. crude oil stocks for last week. [EIA/S]