By Scott DiSavino
NEW YORK (Reuters) – Oil prices fell about 2% on Tuesday on concerns that slower economic growth in the U.S. and China could reduce energy demand, especially after prices rose more than 7% in the past three days .
futures fell $1.88, or 2.3%, to settle at $79.55 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.89, or 2.4%, to $75, 53.
“Today’s price decline, while significant, was still within the range of a normal and deserved correction after a substantial increase of $6 per barrel in three days,” analysts at energy consultancy Ritterbusch and Associates said in a note.
Technical traders noted that prices of both contracts retreated after failing to break above resistance around the 200-day moving averages on Monday.
With U.S. gasoline futures still trading near six-month lows, the 321-crack spread, which measures refining profit margins, remained at its lowest level since February 2021 for a second straight day.
“If the refinery isn’t making money on gasoline and distillate, then the refinery is going to buy less to make gasoline and distillate. The barrels it doesn’t buy are sent to storage,” said Bob Yawger, director of energy futures at Mizuho. said in a note.
US consumer confidence rose to a six-month high in August, but Americans are growing increasingly worried about the labor market after the unemployment rate rose to a near three-year high of 4.3% last month.
That rise in unemployment helped fuel expectations that the U.S. Federal Reserve will cut interest rates next month. Lower rates can stimulate economic growth and demand for oil.
UBS Global Wealth Management sees a 25% chance of a recession in the US, up from 20% previously, citing soft figures from its July labor report.
In Germany, the economy shrank in the second quarter.
Goldman Sachs cut its average Brent forecast for 2025 and set a price range of $5 per barrel, citing slower demand in China. The bank has lowered its range for Brent prices to $70-$85 per barrel, and the average Brent forecast for 2025 will go from $82 to $77 per barrel.
Economic concerns in the US and China offset positive news from Libya and the Middle East that could reduce supplies.
Prices have risen sharply in recent days due to the possible closure of Libya’s oil fields, which could curtail the OPEC member’s production of around 1.2 million barrels per day (some of which had already been reduced), and other tensions in the Middle East following counter-attacks. between Israel and the Iran-backed Hezbollah group in Lebanon in recent days.
“The sense of fear in the Middle East appears to have dissipated after Israel thwarted a large-scale Hezbollah rocket attack. … It is interesting to note that Iran did not intervene to assist in the defense of … Hezbollah,” Yawger at Mizuho said.
US oil inventories
Weekly data on U.S. oil storage will come Tuesday from the trade group American Petroleum Institute and Wednesday from the U.S. Energy Information Administration.
The data is expected to show that energy companies pulled crude oil from U.S. storage last week for the eighth time in nine weeks.
However, analysts forecast that the decline in crude oil storage last week was only 2.3 million barrels in the week ending August 23. [EIA/S] [API/S]
If true, that pullback would be smaller than the decline of 10.6 million barrels in the same week last year and an average decline of 6.3 million barrels over the past five years (2019-2023).
