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Oil drops more than $1 as OPEC+ decision spotlights shaky demand
Global Banking & Finance Review®
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By Paul Carsten
LONDON (Reuters) -Oil prices fell more than $1 on Tuesday on scepticism about an OPEC+ decision to boost supply later this year into a global market where demand has already shown signs of weakness.
Extending losses from a four-month low in the previous session, Brent crude futures were down $1.11, or 1.4%, at $77.25 a barrel by 1336 GMT. Brent’s closing price on Monday was below $80 for the first time since Feb. 7 after falling more than 3%.
At its lowest on Tuesday, Brent traded at $76.76, less than $2 shy of this year’s nadir of $74.79 at the beginning of January.
U.S. West Texas Intermediate crude futures eased by $1.09, or 1.5%, to $73.13. WTI had fallen by 3.6% on Monday to settle near a four-month low.
The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, agreed on Sunday to extend most of their oil output cuts into 2025 but left room for voluntary cuts from eight members to be unwound gradually, beginning in October.
“The market reaction is depressing to anyone who produces oil and brings elevated joy for consumers,” said Tamas Varga of oil broker PVM.
The planned October unwinding adds jitters about oversupply in an environment where traders are already spooked about high interest rates hampering global economic activity, with a steady flow of dim signals from major economies such as the United States, China and Europe suggesting that their appetite for oil may not be as healthy as hoped through the rest of the year.
On top of this, supply is rising from non-OPEC producers such as the U.S.
“With the ‘bad news is bad news’ mantra in place, further evidence of economic weakness may lead oil prices lower,” IG market strategist Yeap Jun Rong said in an email.
The U.S. government will release inventory and product supplied data on Wednesday. [EIA/S]
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.
(Reporting by Paul Carsten in London, Arathy Somasekhar in Houston and Trixie Yap in SingaporeEditing by Jason Neely and David Goodman)
OPEC+ is a coalition of oil-producing countries, including the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russia, that coordinate oil production to influence global oil prices.
Brent crude futures are contracts for the future delivery of crude oil, based on the price of Brent crude oil, which is a major trading classification of crude oil originating from the North Sea.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing, primarily produced in the United States and known for its light and sweet characteristics.
Economic activity refers to the production, distribution, and consumption of goods and services within an economy, which is often measured by indicators like GDP, employment rates, and consumer spending.
Oil output cuts are reductions in the amount of oil produced by countries or companies, often implemented to stabilize or increase oil prices in response to market conditions.
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