Oil falls more than $1 on worries of supply rising later in 2024

Oil prices fell more than $1 on Tuesday, extending losses from a four-month low in the previous session, as investors worried about supply rising later in the year amid signs of weakening U.S. demand.

Brent crude futures fell $1.14 cents, or 1.5%, to $77.22 a barrel at 0825 GMT. Brent on Monday closed below $80 for the first time since Feb. 7, after falling more than 3%.

U.S. West Texas Intermediate crude futures eased $1.23 cents, or 1.7%, to $72.99 a barrel. WTI on Monday fell by 3.6% to settle near a four-month low.

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 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 increased supply from OPEC+ could be pumped into a market where demand has already shown signs of weakness. U.S. manufacturing activity slowed for a second straight month in May, while construction spending in April fell unexpectedly for a second month 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 evidence of economic weakness may lead oil prices lower, potentially paving the way for a retest of the lower end of its month-long range at the $72 level,” IG market strategist Yeap Jun Rong said in an email.

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. [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.