Oil Prices Continue to Decline Amid Supply Concerns for Late 2024
Market Overview
Oil prices continued to decline in early trading on Tuesday, following a significant drop in the previous session. Investors are increasingly worried about a potential rise in supply later in the year, contributing to the downward trend.
Price Movements
Brent Crude Futures
Brent crude futures fell by 20 cents, or 0.3%, reaching $78.16 per barrel. This marks the first time Brent closed below $80 since February 7, following a more than 3% drop on Monday.
U.S. West Texas Intermediate (WTI) Crude
Similarly, U.S. West Texas Intermediate (WTI) crude futures decreased by 17 cents, or 0.2%, settling at $74.05. This also represents a near four-month low, following a 3.6% decline on Monday.
OPEC+ Decisions and Market Impact
The Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, decided on Sunday to extend most of their oil output cuts into 2025. However, they allowed for voluntary cuts from eight members to gradually be reversed starting in October.
Walt Chancellor, an energy strategist at Macquarie, noted that the continuation of these voluntary cuts through the third quarter could intensify supply tightness during the summer. Yet, the possibility of some supply returning in October suggests that OPEC+'s extreme market support might not be sustained indefinitely.
Demand Concerns
Recent months have seen signs of weakening demand growth, further impacting oil prices. U.S. fuel consumption data remains a focal point for investors. According to GasBuddy, the average gasoline price in the United States dropped by 5.8 cents per gallon to $3.50 per gallon on Monday.
The U.S. government is set to release inventory and product supply data on Wednesday. This data, which includes figures on gasoline consumption around Memorial Day weekend—the start of the U.S. driving season—will serve as a crucial indicator of demand.
Conclusion
Oil prices continue to face pressure from both potential increases in supply and concerns over demand. Market participants will be closely monitoring upcoming data releases and OPEC+ actions to gauge future price movements.