Oil settles slightly up on weaker dollar, US economic fears cap gains

By Stephanie Kelly and Arunima Kumar

NEW YORK (Reuters) -Oil prices settled slightly higher on Tuesday, helped by weakness in the dollar, but gains were capped by mounting fears of a U.S. economic slowdown and the impact of tariffs on global economic growth.

Brent crude futures settled 28 cents, or 0.4%, higher at $69.56 a barrel after falling as low as $68.63 in early trade. U.S. West Texas Intermediate crude futures gained 22 cents, or 0.3%, to $66.25 a barrel after previous declines as well.

The dollar index hit a four-month low, making oil less expensive for overseas buyers. [USD/]

But U.S. stock prices, which also influence the oil market, fell again, adding to the biggest selloff in months. Both crude benchmarks fell 1.5% on Monday, when the S&P 500 posted its biggest daily drop since December 18 and the Nasdaq slid 4.0%, its biggest single-day percentage drop since September 2022.

Oil prices pared gains after U.S. President Donald Trump said on Tuesday he had instructed his commerce secretary to add an additional 25% tariff on all steel and aluminum 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. He has imposed, then delayed 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 U.S. recession.

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

Investors are waiting for U.S. inflation data due on Wednesday for clues on the path of interest rates. They also are closely monitoring OPEC+ plans. The producer group has announced plans to increase output in April.

A scaling back of U.S. 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 OPEC+ 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 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 U.S., crude oil stockpiles rose by 4.2 million barrels in the week ended March 7, market sources said, citing American Petroleum Institute figures on Tuesday.

The report comes ahead of U.S. government data on crude stockpiles due on Wednesday.

(Reporting by Stephanie Kelly in New York, Arunima Kumar in Mumbai, Nicole Jao in New York and Emily Chow in Singapore; Editing by Marguerita Choy, Kirsten Donovan and David Gregorio)