Oil prices fell early Tuesday after gains the previous day over concerns over the global economic backdrop, which outweighed supply concerns when Saudi Arabia announced its biggest production cut in years.
Brent crude futures fell 51 cents to $76.20 a barrel at GMT 0506. West Texas Intermediate (WTI) crude fell 54 cents to $71.61 a barrel.
Brent rose as much as $2.60 on Monday and WTI crude rose as much as $3.30 after the world’s largest exporter, Saudi Arabia, said weekend output would fall by 1 million barrels a day to 9 million barrels a day in July. However, the indicators retreated to more moderate gain levels at the end of the day.
Oil prices are still in a bear market and we can say that some developed economies such as Germany have already started to enter a recession.
Market participants are waiting to see what adjustment the US Federal Reserve will set interest rates in June and what China’s May trade data on Wednesday will say about demand in the world’s second-largest oil consumer.
The Fed’s higher interest rates could reduce energy demand, although several analysts say consumption will be strong. Markets are pinning the probability of the Fed stopping rate hikes this month to 77%, according to the CME FedWatch Tool.
With the US not in recession and Europe doing well, demand is still a positive market driver after the latest economic data was released.
China says it would soon be back to normal as it deals with a new wave of COVID-19 that has temporarily limited travel traffic.
The US economy is about to experience a strong summer travel season, which means demand for gasoline and jet fuel will be very strong.