Oil prices retreated on Tuesday, eliminating gains posted from the previous session’s rally, as concerns over faltering demand amid the global economy losing pace curbed the possibility of additional supply cuts from the Organization of Petroleum Exporting Countries (OPEC).
Global benchmark Brent crude oil futures fell 0.69% to $81.75 per barrel, while the US benchmark West Texas Intermediate (WTI) crude oil futures dropped 0.72% to $77.27 per barrel.
The two contracts rose around 2% on Monday after OPEC and allies, including Russia (OPEC+), were reportedly set to weigh the option of further reducing oil supplies at its meeting later this month.
Investors are playing it relatively safe as they await the producer group’s decision, considering worries about demand have not eased.
Analysts have forecast a continuation or more supply cuts into 2024 from the OPEC+.
Oil futures are slightly in a contango, suggesting that there are enough supplies to go around.
Weaker Oil Demand Concerns Amid a Slowing Global Economy
Markets will likely turn their attention to the US and Chinese economic indicators and US inventories to gauge demand trend worldwide. Traders might also assess a sliding greenback, which can fuel crude prices.
Since late September, the oil market has lost around 16% as output in the top producing country, the US, hit its highest levels, while the market worried over demand growth, especially from top oil importer China.
Additionally, traders are looking at a possible loss of demand due to the prospect of a recession in the world’s largest economy next year.
Traders are also considering the previous week’s warning from Walmart Inc. chief executive Doug McMillon about consumers potentially facing deflation soon as the period of high inflation ends.
Data on US crude and gasoline inventories are expected to show an increase last week, while distillates stockpiles are expected to decline. The American Petroleum Institute (API) and Energy Information Administration (EIA) are set to publish their weekly reports on Tuesday and Wednesday, respectively.