Oil Prices Dive More Than 4% Due to Demand Worries Even as OPEC Extends Cuts

July 03, 2019

Oil prices fell more than 4% on Tuesday, even after OPEC and allies including Russia agreed to extend supply cuts until next March, as weak manufacturing data had investors worried that a slowing global economy could dent oil demand.

Brent crude futures fell $2.66, or 4.1%, to settle at $62.40 a barrel.

U.S. West Texas Intermediate crude futures fell $2.84, or 4.8%, to settle at $56.25 a barrel, after touching their highest in more than five weeks on Monday.

The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed on Tuesday to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices.

The extension comes after Russian President Vladimir Putin said on Saturday he had agreed with Saudi Arabia to prolong the pact and continue to cut combined production by 1.2 million barrels per day, or 1.2% of world demand.

Signs of a global economic slowdown, which could hit oil demand growth, means OPEC and its allies could face an uphill battle to shore up prices by reining in supply.

The United States and China agreed at the G20 summit to restart trade talks, but factory activity shrank across much of Europe and Asia in June while U.S. manufacturing activity slowed to near a three-year low.

(Reuters)