Oil futures reversed sharp gains over the past two sessions and fell on Tuesday as investors remained cautious ahead of an OPEC+ meeting where the producer group could discuss deepening supply cuts.
Brent crude futures were down 64 cents, or 0.8%, at $81.68 a barrel by 06:30 GMT, while West Texas Intermediate (WTI) crude oil futures were down 62 cents, or 0.8%, at $77.21 a barrel.
Both contracts rose nearly 2% on Monday after OPEC+, a group of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, said it would consider whether to cut additional oil supplies at its Nov. 26 meeting, sources said.
Those gains were cut on Tuesday. Investors are taking a wait-and-see attitude to confirm the actual OPEC+ decision.
Most analysts agree that OPEC+ will extend or even deepen oil supply cuts into next year.
The environment is ripe for the group to make deeper production cuts, but Saudi Arabia will want to share the burden of adjustment with others.
Reopening the quota agreements reached in June could prove difficult, prolonging negotiations and thus prompting Saudi Arabia to seek further voluntary adjustments from other producers. This action is already partially priced in the market.
Oil prices have fallen nearly 16% since late September as crude oil production in the United States, the world’s largest producer remains at record levels and the market is worried about demand, especially from China, the world’s largest oil importer.
Investors are also watching for signs of loss of demand from a possible U.S. recession in 2024 and are taking into consideration last week’s warning of possible deflation by Walmart, the largest U.S. retailer.
U.S. crude oil and gasoline stockpiles likely rose last week, while distillate stockpiles fell, according to a preliminary survey. Weekly stock reports from the American Petroleum Institute and the Energy Information Administration will be released on Tuesdays and Wednesdays, respectively.