Oil rose 4% before Monday's earnings after the U.S.-China trade truce boosted overall stock market and commodities.
West Texas Intermediate (CL = F) futures rose more than 2%, hovering at $62.50 a barrel. International benchmark Brent Crude Oil (BZ = F) also rebounded to more than $65.
The oil price rally on Monday exacerbated the possible short positions, which could be exacerbated after talks between the U.S. and China led to tariffs and a significant reduction in responsibilities.
Read more: What Trump’s tariffs mean to the economy and your wallet
"It's a back risk for traders, which triggers some rough cover," said Dennis Kissler, senior vice president of Bok Financial, in a client note. Investors are worried that the trade war will trigger an economic slowdown that will affect oil demand.
In other news, oil giant Saudi Aramco announced a decline in profits in the last quarter over the weekend, sparking speculation that Saudi Arabia, head of oil exporters and their allies (OPEC+), could cut some of the cartel's recent production has grown.
Futures have dropped by more than 12% so far due to fears of a reduction in demand for a global trade war and expectations for OPEC supply have decreased.
Last week, U.S. shale producer Diamondback (Fang) warned that domestic production could peak in the coming quarters given current prices.
If OPEC+ even decides to increase in July as its output increases, then Goldman Sachs analysts will see downside risks for oil.
"We expect steady supply growth outside of the U.S. shale will further weigh prices and shale supply and update (mainly downside) risky prices," Goldman's Daan Struyven and his team wrote Sunday night.
Analysts predict Brent has averaged $60 down the rest of 2025, with an average of $56 in WTI.
Ines Ferre is a senior business journalist at Yahoo Finance. Follow her on X @ines_ferre.
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Correction: The previous version of this article misspelled Daan Struyven's name. We regret our mistakes.