Investing.com– Oil prices fell to a four-month low in Asian trading on Tuesday, extending losses after OPEC+ signaled it would begin reducing its production cuts this year, as Weak economic data has raised concerns about weak demand.
The was down 0.4% at $78.05 a barrel, while the was down 0.4% at $73.80 a barrel as of 9:03 p.m. ET (01:03 GMT). Both contracts fell about 3.3% each on Monday, and were at their lowest levels since early February.
OPEC+ decision to start cutting production seen as bearish
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) decided at a weekend meeting to maintain production cuts of 3.6 million barrels per day until the end of the year.
However, the cartel will begin reducing production by 2.2 million barrels per day from the end of September 2024 to October 2025.
This reduction was seen as a bearish signal for markets, particularly if demand does not materialize as OPEC+ forecasts for the coming year. It also indicates that the cartel has limited room to continue supporting oil prices.
“The market expected them to stay in place until the end of the year. This caused them to fall … as investors weigh the increase in supply against an uncertain economic backdrop,” ANZ analysts wrote in a note.
Weak PMI data and mixed China indexes spark demand fears
Crude markets were also spooked by weak data from the United States, which showed manufacturing activity in the country contracted for the second straight month in May.
The figures have raised concerns that soaring inflation and high interest rates will weaken economic activity in the world’s largest fuel consumer, which could lead to weakening demand.
This week’s focus is on key data from the country’s labor market, which are expected to be factored into the interest rate outlook. Markets have positioned themselves in favor of one from the Fed.
Mixed PMI results from major oil importer China also weighed on sentiment, after data released last week revealed an unexpected contraction in the country’s manufacturing sector.
In addition to concerns over OPEC+ and weak demand, oil traders also factored in crude’s risk premium after the United States attempted to broker a ceasefire between Israel and Hamas, which could herald more stable geopolitical conditions in the Middle East.
