SINGAPORE/NEW YORK (Reuters/Web Desk) – Oil prices were nosediving on Tuesday, extending losses from the previous session when prices fell to their lowest in four months, as investors worried about supply ticking up later in the year amid cautious demand outlooks from key consumer the US.
Brent crude futures fell $1.06 or 1.35 per cent to $77.30 a barrel at 0840 GMT. Brent closed below $80 for the first time since Feb 7, after falling more than 3pc on Monday.
Similarly, US West Texas Intermediate (WT) crude futures were down $1.17, or 1.58pc to $73.05. It had also settled near a four-month low on Monday after sliding 3.6pc.
Earlier on Monday, Brent crude futures fell by $2.75, or 3.4pc, to settle at $78.36 a barrel, while the US WTI crude futures closed at $74.22 a barrel.
The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as 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 from October onward.
Read more: OPEC+ extends oil production cuts deep into 2025
"Oil prices have been facing a double whammy lately, with the supply story weighed by OPEC+ guidance to start unwinding some production cuts from October 2024, while demand conditions have not been well-supported with weaker-than-expected US manufacturing activities," said IG market strategist Yeap Jun Rong in an email.
US manufacturing activity slowed for a second straight month in May, with construction spending falling unexpectedly for a second month in April 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 economic weakness presented may lead oil prices lower, potentially paving the way for a retest of the lower end of its month-long range at the US$72.00 level," he added.
Signs of weakening demand growth have weighed on oil prices in recent months, with data on US fuel consumption in focus.
The average gasoline price in the United States declined 5.8 cents per gallon to $3.50 per gallon on Monday, according to GasBuddy data.
The US government will release inventory and product supplied data on Wednesday. Product supplied, considered a proxy for demand, will show how much gasoline was consumed around the Memorial Day weekend, the start to the US driving season.
Concerns on these macroeconomic drivers from the world's top oil consumer are likely to continue to drive prices in the near-term, some analysts say.
"The broader market is growing increasingly concerned over the US consumer, US end-user oil demand (indicators of which have suffered from data accuracy over May but which remain underwhelming), and its global implications," said Sparta Commodities analyst Neil Crosby in a weekly client note.