Oil Prices Dip 1% in Asian Trade Amid Supply Concerns and Weakening US Demand
In a volatile Asian trade session on Tuesday, oil prices took a hit, dropping as much as 1%. This decline comes on the heels of a four-month low in the previous session, with investors fretting over the possibility of increased supply later in the year alongside signs of weakening demand in the US, as reported by Reuters.
Brent Crude and US WTI Futures Slide
Brent crude futures saw a 0.93% decrease, falling 73 cents to $77.63 a barrel at 09:38 a.m. Saudi time. This marked the first time Brent closed below $80 since February 7, following a more than 3% drop on Monday. Similarly, US West Texas Intermediate crude futures slipped 1.17% to $73.35 a barrel after settling near a four-month low on Monday with a 3.6% decline.
OPEC+ Agrees to Extend Output Cuts
Over the weekend, the Organization of the Petroleum Exporting Countries and its allies, led by Russia (OPEC+), decided to prolong most of their oil output cuts into 2025. However, the agreement allows for voluntary cuts from eight members to gradually unwind starting from October.
Weaker Demand and Economic Concerns Put Pressure on Oil Prices
According to IG market strategist Yeap Jun Rong, oil prices are facing challenges from both the supply side due to OPEC+ decisions and weak US demand. US manufacturing activities have slowed, along with unexpected drops in construction spending, potentially leading to lower oil and fuel demand.
US Fuel Consumption and Inventory Data in Focus
Data on US fuel consumption, including the average gasoline price of $3.50 per gallon, has been closely monitored. The US government is set to release inventory and product supplied data on Wednesday, shedding light on Memorial Day weekend gasoline consumption and the start of the US driving season.
Analysts Predict Continued Price Pressure from US Demand Concerns
Analysts like Neil Crosby from Sparta Commodities believe that worries about US consumer behavior and oil demand indicators will persist, influencing global oil prices in the short term. The market remains cautious about the macroeconomic drivers from the world’s largest oil consumer.