Precise Investors

Alternative Investments

Oil drops on worries of supply rising later this year

Oil prices rise

Brent crude futures dropped $1.14 cents, or 1.5%, to $77.22 a barrel, and Brent closed below $80 for the first time since February 7

Oil prices dropped more than $1 on Tuesday, extending losses from a four-month low in the previous session, as investors worried about supply rising later in the year amid signs of weakening U.S. demand.

Brent crude futures dropped $1.14 cents, or 1.5%, to $77.22 a barrel at 0825 GMT. Brent on Monday closed below $80 for the first time since February 7, after dropping more than 3%.

U.S. West Texas Intermediate (WTI) crude futures eased $1.23 cents, or 1.7%, to $72.99 a barrel. WTI on Monday dropped by 3.6% to settle near a four-month low.

The OPEC+ on Sunday agreed to extend most of their oil output cuts into 2025 but left room for voluntary cuts from eight members to be gradually unwound beginning in October.

The market reaction is depressing to anyone who produces oil and brings elevated joy for consumers, said Tamas Varga of oil broker PVM.

The increased supply from OPEC+ could be pumped into a market where demand has already shown signs of weakness.

U.S. manufacturing activity slowed for a second successive month in May, while construction spending in April dropped unexpectedly for a second consecutive month on declines in non-residential activity – both of which could translate into weaker oil and fuel demand.

With the ‘bad news is bad news’ mantra in place, further evidence of economic weakness may lead oil prices down, potentially paving the way for a retest of the lower end of its month-long range at the $72 level, stated IG market strategist Yeap Jun Rong.

Signs of weakening demand growth have weighed on oil prices in recent months, with data on U.S. fuel consumption in focus. The average gasoline price in the US dropped 5.8 cents per gallon to $3.50 per gallon on Monday, according to GasBuddy data.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Precise Investors. The information provided on Precise Investors is intended for informational purposes only. Precise Investors is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

Leave a Reply