Oil futures fell Tuesday, extending a slide that took crude to its lowest close in four months in the previous session triggered in part by OPEC+’s decision to begin unwinding some production cuts later this year.
Worries about the U.S. economic outlook after weak data Monday also contributed to worries about the demand outlook, analysts said.
Price moves
- West Texas Intermediate crude CL00, -2.01% for July delivery CL.1, -1.99% CLN24, -2.02% fell $1.74, or 2.3%, to $72.48 a barrel on the New York Mercantile Exchange.
- August Brent crude BRN00, -1.75% BRNQ24, -1.71%, the global benchmark, dropped $1.57, or 2%, to $76.79 a barrel on ICE Futures Europe.
Market drivers
WTI and Brent crude both ended at their lowest since early February in Monday’s session as investors reacted to a decision by the Organization of the Petroleum Exporting Countries and its Russia-led allies to begin slowly phasing out a suite of voluntary production cuts from eight members totaling 2.2 million barrels a day over a 12-month period beginning in October.
OPEC+ on Sunday also agreed to extend group cuts of around 3.66 mbd that were due to expire at the end of this year through the end of 2025.
“The price weakness on the oil market suggests that market participants doubt that OPEC+ will be able to gradually reduce its voluntary production cuts without risking oversupply,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
”Although this isn’t the case for the autumn, it does apply to the coming year in view of the implicit market balance. OPEC+ is apparently counting on a significant revival in oil demand,” he said.
A weak reading from the Institute for Supply Management’s U.S. manufacturing index on Monday served to raise worries over the outlook for the world’s largest economy. The index fell to a three-month low of 48.7% in May from 49.2% in the prior month. Numbers below 50% signal that the manufacturing sector is contracting.