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Oil prices fall by more than $1 on fears of increased supply in the second half of 2024

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Oil prices fell more than $1 on Tuesday, extending losses from a four-month low hit the previous day, as investors worried about rising supply later this year amid signs of weakening U.S. demand.

Brent crude futures were down 1.14 cents, or 1.5 percent, at $77.22 a barrel as of 0825 GMT. Brent crude fell more than 3 percent on Monday, closing below $80 for the first time since February 7.

U.S. West Texas Intermediate crude futures fell 1.23 cents, or 1.7%, to $72.99 a barrel. WTI fell 3.6% on Monday to close near a four-month low.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia (OPEC+) agreed on Sunday to extend most of their crude production cuts until 2025, but left room for the eight member states to gradually lift voluntary production cuts from October.

“The market reaction is depressing for everyone who produces oil and brings joy to consumers,” said Tamas Varga at oil broker PVM. The OPEC+ supply boost could flow into a market that is already showing signs of weakening demand. U.S. manufacturing activity slowed for a second straight month in May, and construction spending unexpectedly fell for a second straight month in April due to a drop in non-residential activity, both of which could lead to lower demand for oil and fuel. “With the ‘bad news is bad news’ mantra taking hold, further evidence of economic weakness could send crude prices lower, paving the way for a retest of the lower end of the month-long range at $72,” Yep Jun Rong, market strategist at IG, said in an email.

Signs of weakening demand growth have weighed on crude oil prices in recent months, bringing U.S. fuel consumption data into focus. The average U.S. price of gasoline fell 5.8 cents a gallon on Monday to $3.50 a gallon, according to GasBuddy data.

The U.S. government is due to release inventory and product supply data on Wednesday. [EIA/S]

The supply product, considered a proxy for demand, will show how much gasoline was consumed over Memorial Day weekend, the start of the U.S. driving season.

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