Oil prices fell to a four-month low on Tuesday, continuing a decline after OPEC+ signaled it will begin tapering its production cuts later this year. Weak economic data also raised concerns about sluggish demand.
Brent oil futures for August delivery fell 0.4 percent to $78.05 per barrel, while West Texas Intermediate crude futures fell 0.4 percent to $73.80 per barrel by 21:03 ET (01:03 GMT). Both contracts had dropped around 3.3 percent on Monday, reaching their lowest levels since early February.
OPEC+ announces tapering of production cuts
OPEC+ decided in a weekend meeting to maintain 3.6 million barrels per day (bpd) of production cuts until the end of this year. However, the group will begin scaling back 2.2 million bpd of those cuts from the end of September 2024 through October 2025.
This tapering plan was seen as a bearish signal for the market, especially if demand does not materialize as OPEC+ has forecast for the coming year. It also indicated that the producer group has limited room to continue supporting oil prices.
Weak U.S. manufacturing data fuels demand concerns
Crude markets were also shaken by weak purchasing managers’ index (PMI) data from the U.S., which showed manufacturing activity contracted for a second consecutive month in May. This raised concerns that high inflation and interest rates were dampening economic activity in the world’s largest fuel consumer, potentially leading to weaker demand.
Focus shifts to U.S. labor market data
Investors are now focused on key U.S. labor market data this week, which could influence the outlook for interest rates. Markets are positioning for a potential interest rate cut by the Federal Reserve in September.
Mixed PMI readings from top oil importer China also weighed on sentiment, after official data showed an unexpected contraction in the country’s manufacturing sector last week.
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