London — Oil prices tumbled more than $1 a barrel on Tuesday, after a strong rally in the previous session as worries about the global economic growth outweighed Saudi Arabia’s pledge to deepen output cuts.
Brent crude futures were down $1.33, or 1.73%, to $75.38 a barrel by 0923 GMT. U.S. West Texas Intermediate crude fell $1.39, or 1.93%, to $70.76 a barrel.
Brent had gained as much as $2.60/bbl on Monday and WTI as much as $3.30 after Saudi Arabia, the world’s top exporter, said at the weekend its output would drop by 1 million barrels per day (bpd) to 9 million bpd in July. The benchmarks pulled back, though, to more modest gains by the end of the day.
“The market remains focused on the risk to demand with recession concerns mounted on a broad-based miss in U.S. services PMI giving room for a Fed pause on rates,” said Ole Hansen, head of commodity strategy at Saxo Bank.
The U.S. services sector barely grew in May as new orders slowed, and market participants are waiting to see if the U.S. Federal Reserve will hike or hold interest rates in June.
Higher interest rates could curb energy demand.
The mood was further dented by data that showed German industrial orders fell unexpectedly in April.
“If upcoming economic data suggests entrenched inflationary pressure and investors bet on further hikes in interest rates, demand predictions could be revised downwards, effectively neutralizing the ostensibly bullish impact of the latest (OPEC+) output decision,” Tamas Varga of brokerage PVM said.
The U.S. Energy Information Administration (EIA) is due to release its short-term energy outlook on Tuesday afternoon, while China’s May trade data on Wednesday will give fresh demand indications for the world’s second-largest oil consumer.
*Rowena Edwards, Arathy Somasekhar & Trixie Yap; Editing: Sriraj Kalluvila – Reuters
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