New York — Oil prices fell about 2% on Tuesday on worries that slower economic growth in the U.S. and China could reduce demand for energy, especially after prices surged over 7% during the prior three days.
Brent futures fell $1.31, or 1.6%, to $80.12 a barrel by 11:27 a.m. EDT (1527 GMT). U.S. West Texas Intermediate (WTI) crude fell $1.30, or 1.7%, to $76.12.
“The complex is pulling back today as crude takes a breather from the strong $6 advance of the prior three sessions. However, this looks like a normal correction that is likely to be followed by a renewed upswing,” analysts at energy advisory firm Ritterbusch and Associates said in a note.
Technical traders noted that prices of both contracts on Monday failed to break above resistance around the 200-day moving averages.
Prices rose strongly over the past few days with analysts pointing to potential shutdown of Libya’s oil fields that could curtail the OPEC-member’s roughly 1.2 million-barrel per day of output, and other tensions in the Middle East following counter attacks between Israel and the Iran-backed Hezbollah group in Lebanon in recent days.
“Markets remain on edge as skirmishes between Israel and Hezbollah intensify,” ANZ analysts said in a note.
Also supporting crude prices recently are growing expectations that the Federal Reserve will cut interest rates next month. Lower rates can boost economic growth and demand for oil.
Traders are betting on a 25- or 50-basis point interest rate cut in September. CME Group’s Fed Watch tool shows a 71.5% chance for 25 basis points a 28.5% chance for 50 basis points.
UBS Global Wealth Management sees a 25% chance of a U.S, recession, up from 20% previously, citing soft numbers in the July labor report.
U.S. Oil Inventories
U.S. data is expected to show energy firms last week pulled crude from storage for the eighth week of nine.
Analysts projected U.S. energy firms pulled about 3.0 million barrels of crude out of storage during the week ended Aug. 23.
That compares with a withdrawal of 10.6 million barrels during the same week last year and an average decrease of 6.3 million barrels over the past five years (2019-2023).
Weekly U.S. oil storage data is due from the American Petroleum Institute (API) trade group on Tuesday and the U.S. Energy Information Administration (EIA) on Wednesday.
Goldman Sachs cut its average 2025 Brent forecast and range for prices by $5 per barrel, citing slower demand in China. The bank reduced its range for Brent prices to $70-$85 a barrel, and 2025 average Brent forecast to $77 per barrel from $82.
In Germany, the economy shrank in the second quarter. Adding to global uncertainty, Russia warned the West was playing with fire by considering allowing Ukraine to strike deep into Russia with Western missiles and cautioned the U.S. that World War Three would not be confined to Europe.
*Scott DiSavino, Paul Carsten, Colleen Howe, Emily Chow & Arunima Kumar; editing: David Goodman, Jonathan Oatis & David Gregorio – Reuters
This article was originally posted at sweetcrudereports.com
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