Oil edges higher, but recession fears and US tariffs limit gains

Oil prices edged higher, helped by weakness in the dollar, although gains were capped as concerns mounted over a US slowdown and the impact of tariffs on global economic growth.

Brent crude futures were 36 cents, or 0.5%, higher at $69.64 a barrel by 1:01 p.m. EDT (1701 GMT) after falling as low as $68.63 in early trade. US West Texas Intermediate crude futures gained 28 cents, or 0.4%, to $66.31 a barrel after previous declines as well.

Both benchmarks closed 1.5% lower in the previous session. The dollar index hit a four-month low, making oil less expensive for overseas buyers.

Oil prices, however, pared back some gains after US President Donald Trump said on Tuesday he had instructed his commerce secretary to add an additional 25% tariff on all steel and aluminium imports from Canada, bringing the total tariff on those products to 50%.

“That kind of drama is adding to the volatility here,” said Phil Flynn, senior analyst with the Price Futures Group.

Trump’s protectionist policies have shaken global markets, imposing and delaying tariffs on major oil suppliers Canada and Mexico, while also raising duties on China, prompting retaliatory measures.

Over the weekend, Trump said a “period of transition” was likely and declined to rule out a US recession.

Stocks, which crude prices often follow, extended their decline after slumping on Monday when the S&P 500 posted its biggest one-day drop since December 18 and the Nasdaq slid 4.0%, its biggest single-day percentage drop since September 2022.

In supply, US crude oil production is poised to set a larger record this year than prior estimates, at an average 13.61 million bpd, the US Energy Information Administration said on Tuesday.

Investors are waiting for US inflation data due on Wednesday for clues on the path of interest rates.

Meanwhile, they are closely monitoring OPEC+ plans after the producer group announced plans to increase output in April.

A scaling back of US tariffs would ease fears of inflation and economic contraction, said PVM analyst Tamas Varga, but the recent oil price plunge meant it was “hard to see OPEC+ going ahead with its plan and releasing oil back to the market from April.” On Friday, Russia’s Deputy Prime Minister Alexander Novak told reporters that the OPEC+ producer group would go ahead with its April increase but may then consider other steps, including reducing production.

Brent is finding strong technical support at around $70 a barrel and may look to stage a bounce, said Suvro Sarkar, energy sector team lead at DBS Bank, adding that the OPEC+ supply response would be flexible, depending on market conditions.

“If oil prices fall below the $70 per barrel mark for an extended period, output hikes may be paused in our opinion. OPEC+ will also keep a careful eye on Trump’s Iran and Venezuela policies,” he said.

In the US, crude oil stockpiles were expected to have risen last week, while distillate and gasoline inventories likely fell, a preliminary Reuters poll showed on Monday.

Even as US stocks seek to regain their footing, weakness in a closely followed index of transportation shares is a sign of growing investor worries about the economy.

The S&P 500 posted a modest weekly gain, snapping a four-week streak of declines. The benchmark index was clawing back after it marked a correction last week by ending down over 10% from its February record high.

The Dow Jones Transportation Average edged lower on the week, compounding the slide for the 20-stock index. The gauge of airlines, truckers, rail companies, package delivery giants and other transport firms has slumped over 17% from its November all-time closing peak.

“The transports are an important tell on future economic activity,” said Chuck Carlson, chief executive officer of Horizon Investment Services. “The fact that they have significantly underperformed ... gives me pause.”

The Dow Transports is struggling as investors are concerned about an economic slowdown, driven in part by uncertainty over the fallout from US President Donald Trump’s back-and-forth tariff policies. The Federal Reserve on Wednesday downgraded its US economic growth forecast this year to 1.7% from 2.1%, with central bank Chair Jerome Powell pointing to “unusually elevated” uncertainty.

So far in 2025, the Dow Transports are down 8%, doubling the drop for the S&P 500 index in that time.

Weakness within the index has been broad. This year, shares of package delivery companies FedEx and United Parcel Service are down 18% and about 9%, respectively. FedEx shares tumbled on Friday after the firm cut its annual financial forecasts.