WTI moves below $61.50, downside seems limited due to easing of US-China trade tensions

• WTI price may recover amid renewed optimism driven by progress in US-China trade talks.

• The two nations have reached a preliminary agreement in Switzerland to substantially reduce tariffs, indicating a de-escalation in trade tensions.

• Oil prices may struggle due to concerns over a possible supply glut, especially with the prospect of increased OPEC+ output.

West Texas Intermediate (WTI) Oil price paused its three-day winning streak, trading around $61.40 per barrel during Asian hours on Tuesday. Despite this pullback, Oil prices remain underpinned by optimism following progress in the United States (US)-China trade negotiations.

Over the weekend, the United States and China reached a preliminary deal in Switzerland to significantly reduce tariffs, signaling a possible easing of trade tensions. Under the agreement, the US will lower tariffs on Chinese goods from 145% to 30%, while China will cut its tariffs on US imports from 125% to 10%. The breakthrough has been widely welcomed by markets as a key step toward de-escalation.

However, downside risks to Oil prices persist. Concerns about oversupply continue to weigh on the Oil market, particularly with OPEC+ signaling a potential increase in output for May and June. Adding to the pressure, President Donald Trump indicated progress in nuclear talks with Iran, fueling speculation that US sanctions on Iranian oil exports could be eased.

Geopolitical developments are also in focus. Ukrainian President Volodymyr Zelensky has invited President Trump to participate in potential peace talks in Turkey this week, as Kyiv intensifies efforts to secure a cease-fire in the ongoing conflict with Russia.

On the regulatory front, the US Department of Energy announced plans on Monday to eliminate or revise more than 40 regulations and programs as part of President Trump’s push to roll back federal oversight and diversity initiatives. The department claims the move could save taxpayers $11 billion and marks the first phase of its most extensive deregulation drive to date.

Looking ahead, market participants are awaiting the release of the US Consumer Price Index (CPI) report for April, scheduled later on Tuesday. Analysts expect headline inflation to rebound to 0.3% month-over-month from a previous -0.1%, while core CPI is also projected to rise to 0.3% from 0.1%. Year-over-year figures for both are forecast to remain unchanged.