ALBAWAB – Oil prices fell $0.51 and $0.54 on the barrel of Brent and West Texas Intermediate (WTI) crudes, respectively, on Tuesday, having gained $2.6 and $3.3 on the barrel just one day ago, Monday.
Brent crude futures slipped to $76.20 and WTI crude to $71.61, despite Saudi Arabia’s announcement of further production cuts, by 1 million barrels per day as of July.
The remaining members of the Organization of Petroleum Exporting Countries and their allies (OPEC+) also announced upholding their previously agreed output cuts until December 2024.
Saudi’s July cuts drove oil prices up, Monday, almost instantaneously.
However, concerns about the global economic situation outweighed supply pressures resulting from Saudi’s biggest output cut in years, according to Reuters.
"Oil prices are still in a bear market, and we can see that some advanced economies have already started to fall into recession such as Germany," CMC Markets analyst Leon Li told Reuters.
On the other hand, markets are waiting in anticipation of the United States (US) Federal Reserve Board (Fed) decision on interest rates.
The Fed is scheduled to convene in June to discuss and decide whether they will hold or hike rates moving forward.
Traders are also holding their breath for China’s May trade and manufacturing data. This would serve as an indicator on demand in the world’s second-largest oil consumer.
Despite expectations of strong consumption in the coming months, it is equally likely that higher interest rates could curb energy demand.
Chances that the Fed hikes interest rates further this month are pegged at 77 percent, according to the CME FedWatch Tool, as reported by Reuters
Nonetheless, Rystad Energy research director Claudio Galimberti predicted to Reuters that demand is still expected to be a positive market driver after the release of recent economic data.
The US is not in a recession and Europe is doing fine, he said.
