Oil prices declined at the start of trading on Tuesday, continuing the downward trend from the previous session. Concerns among investors about an increase in supply later in the year contributed to the decline. Brent crude futures dropped by 20 cents or 0.3% to reach $78.16 per barrel. This marked the first time since February 7 that Brent closed below $80, following a more than 3% drop on Monday. U.S. West Texas Intermediate crude futures also decreased by 17 cents or 0.2% to $74.05 per barrel. It had settled near a four-month low on Monday after sliding 3.6%. Over the weekend, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, agreed to extend most of their oil output cuts into 2025. However, they left room for voluntary cuts from eight members to be gradually unwound starting in October.
According to Walt Chancellor, an energy strategist at Macquarie, the voluntary cuts in crude production being extended through the third quarter will further tighten the market during the summer. However, the possibility of some supply returning in October suggests that the strong support from OPEC+ may not be sustainable in the long term.
In addition, the weakening demand growth has also had an impact on oil prices in recent months, with a particular focus on data on U.S. fuel consumption. GasBuddy data shows that the average gasoline price in the United States dropped by 5.8 cents per gallon to $3.50 per gallon on Monday.
On Wednesday, the U.S. government will release inventory and product supplied data, which will provide insights into demand. The product supplied data, which is considered a proxy for demand, will reveal the amount of gasoline consumed over the Memorial Day weekend, marking the start of the U.S. driving season.