WionDrive News Desk 
The oil market witnessed a bearish trend on Tuesday, with both Brent crude and U.S. West Texas Intermediate (WTI) crude futures experiencing notable declines. Brent crude futures fell by USD 1.14, or 1.5%, to USD 77.22 a barrel, while WTI crude futures eased by USD 1.23, or 1.7%, to USD 72.99 a barrel. These losses followed a turbulent previous session where Brent crude closed below USD 80 for the first time since February 7, marking a drop of more than 3%.
The driving force behind this downward momentum in oil prices stems from concerns over a potential increase in supply later in the year, coupled with signs of waning demand in the United States, one of the world’s largest oil consumers.
Over the weekend, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, reached an agreement to extend most of their oil output cuts into 2025. However, the decision left room for voluntary cuts from eight member countries to be gradually unwound starting in October.
This move has raised concerns among market participants about a potential oversupply situation in the latter part of the year, weighing heavily on oil prices. As Tamas Varga of oil broker PVM aptly stated, “The market reaction is depressing to anyone who produces oil and brings elevated joy for consumers.”
Compounding the bearish sentiment is the growing evidence of weakening demand in the United States. Recent economic data revealed a slowdown in U.S. manufacturing activity for the second consecutive month in May, while construction spending in April unexpectedly declined for the second month in a row, primarily driven by a downturn in non-residential activity.
These indicators could translate into weaker oil and fuel demand, further exacerbating the existing supply-demand imbalance. IG market strategist Yeap Jun Rong commented, “With the ‘bad news is bad news’ mantra in place, further evidence of economic weakness may lead oil prices lower, potentially paving the way for a retest of the lower end of its month-long range at the USD 72 level.”
The oil market is also closely monitoring gasoline consumption data in the United States, as it serves as a proxy for overall fuel demand. According to GasBuddy data, the average gasoline price in the country declined by 5.8 cents per gallon to USD 3.50 per gallon on Monday.
Investors are eagerly awaiting the release of inventory and product-supplied data from the U.S. government on Wednesday. The product-supplied data, often considered a proxy for demand, will provide insights into gasoline consumption around the Memorial Day weekend, marking the start of the U.S. driving season.
As the oil market grapples with the interplay of supply and demand dynamics, the coming weeks and months are likely to be marked by volatile price movements, reflecting the ever-evolving landscape of global energy markets.
