Singapore, June 6 (BNA): Oil prices fell early on Tuesday, giving up gains made the day before as worries about the global economic backdrop overshadowed supply concerns raised when Saudi Arabia announced its biggest production cut in years.
Brent crude futures fell 51 cents to $76.20 a barrel by 05:06 GMT. US West Texas Intermediate crude fell 54 cents to $71.61 a barrel, Reuters reported.
Brent gained as much as $2.60 on Monday and U.S. crude gained $3.30 after Saudi Arabia, the world’s largest exporter, said over the weekend that its output would fall by 1 million bpd to 9 million bpd in July. Benchmarks, though, retreated to more modest gains by the end of the day.
“Oil prices are still in a bear market, and we can see that some advanced economies are already starting to collapse into recession, like Germany,” said Leon Lee, an analyst at CMC Markets.
Market participants are waiting to see if the US Federal Reserve will raise or suspend interest rates in June, and what Chinese trade data for May on Wednesday will indicate about demand in the world’s second-largest oil consumer.
Higher interest rates from the Fed could curb energy demand, although many analysts say consumption will be strong. Markets are now holding the chances of the Fed pausing rate hikes this month at 77%, according to the CME FedWatch Tool.
Demand is expected to be a positive driver for the market after the release of the latest economic data, with the US not entering a recession and Europe doing well, according to Rystad Energy Research Director Claudio Gallimberti.
He said that while China is dealing with a new wave of COVID-19 that is temporarily limiting traffic, it will return soon.
“The US economy is about to show a very strong summer travel season which means that demand for gasoline and jet fuel will be very strong,” Edward Moya, senior market analyst at OANDA, said in a note.
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