(Reuters) – Oil prices fell in Asia on Tuesday, having slumped to a four-month low in the previous session, as investors worried about rising supply in the second half of the year amid a cautious demand outlook in top consumer nation the United States.
Brent crude futures were down 49 cents, or 0.63 percent, at $77.87 a barrel as of 0343 GMT. Brent crude closed below $80 for the first time since February 7 after dropping more than 3 percent on Monday.
West Texas Intermediate crude futures fell 51 cents, or 0.51%, to $73.71 after falling 3.6% on Monday and closing near a four-month low.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia (OPEC+) agreed on Sunday to extend most of their crude oil production cuts until 2025, but left room for the eight member states to gradually lift voluntary cuts after October.
“Oil prices have faced a double whammy recently, with supply conditions pressured by OPEC+ guidance to start partially unwinding production cuts from October 2024, while demand conditions have been less supported by weaker-than-expected US manufacturing activity,” Yep Jun Rong, market strategist at IG, said in an email.
U.S. manufacturing activity slowed for a second straight month in May, while a drop in nonresidential activity led construction spending to unexpectedly fall for a second straight month in April, both of which could weaken demand for oil and fuels.
“With the ‘bad news is bad news’ mantra taking hold, any further signs of economic weakness could send oil prices lower, paving the way for a retest of the $72 level, the lower end of the month-long range,” he added.
Signs of weakening demand growth have weighed on crude oil prices in recent months, bringing U.S. fuel consumption data into focus. The average U.S. price of gasoline fell 5.8 cents a gallon on Monday to $3.50 a gallon, according to GasBuddy data.
The U.S. government is due to release inventory and product supply data on Wednesday. Product supply, considered a proxy for demand, will show how much gasoline was consumed over the Memorial Day weekend, the start of the U.S. driving season.
Some analysts say concerns about these macroeconomic factors from the world’s largest oil consumer are likely to continue to push up prices in the near term.
“Across the market, there are growing concerns about the U.S. consumer, U.S. end-user oil demand (a measure of which had data accuracy issues in May but remains disappointing), and what that means for the world,” Neil Crosby, an analyst at Sparta Commodities, said in a weekly client note.
(Reporting by Arathy Somasekhar in Houston and Trixie Yap in Singapore; Editing by Sonali Paul and Michael Perry)
