Oil prices fell sharply on Tuesday, extending losses from the previous session, as investors expressed concerns over the potential for supply increases later this year and signs of weakening demand in the United States.
Brent crude futures declined by $1.14, or 1.5%, to settle at $77.22 per barrel, while U.S. West Texas Intermediate (WTI) crude futures eased by $1.23, or 1.7%, to $72.99 per barrel. The declines followed a significant drop on Monday, with Brent closing below $80 for the first time since February 7th.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed on Sunday to extend most of their output cuts into 2025, but left room for some members to gradually unwind their voluntary reductions starting in October. This potential increase in supply has raised concerns among investors, who are already grappling with signs of weakening demand.
U.S. manufacturing activity slowed for a second consecutive month in May, while construction spending in April unexpectedly declined for the second month in a row, primarily due to a drop in non-residential activity. These economic indicators suggest that oil and fuel demand may be weakening, further pressuring prices.
Additionally, the average gasoline price in the United States declined by 5.8 cents per gallon to $3.50 per gallon on Monday, according to GasBuddy data, reflecting the impact of softer demand.
Analysts are closely watching the upcoming release of U.S. inventory and product supplied data, which could provide further insights into the state of demand in the world’s largest oil consumer.