Oil prices eased as much as 1% in Asian trade on Tuesday, extending losses from a four-month low in the previous session, as investors worried about supply ticking up later in the year amid signs of weakening U.S. demand.
Brent crude futures fell 73 cents, or 0.93%, to $77.63 a barrel at 0638 GMT. Brent closed below $80 for the first time since Feb. 7, after falling more than 3% on Monday.
U.S. West Texas Intermediate crude futures eased 87 cents, or 1.17% to $73.35 a barrel. It had also settled near a four-month low on Monday after sliding 3.6%.
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.
“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,” IG market strategist Yeap Jun Rong said in an email.
U.S. 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,” Yeap said.
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 United States declined 5.8 cents per gallon to $3.50 per gallon on Monday, according to GasBuddy data.
The U.S. 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 U.S. 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,” Sparta Commodities analyst Neil Crosby said in a weekly client note.
