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Oil Prices Drop on Demand Worries, U.S. Inventories on Tap

Investing.com - Oil prices fell on Tuesday as concerns over demand in a slowing economy outweighed the passage of an extension of output cuts by OPEC and its allies.

Investing.com - Oil prices fell on Tuesday as concerns over demand in a slowing economy outweighed the passage of an extension of output cuts by OPEC and its allies.

New York-traded West Texas Intermediate crude futures fell 23 cents, or 0.4%, to $58.86 a barrel by 7:21 AM ET (11:21 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., also lost 23 cents, or 0.4%, to $64.83.

All OPEC and non-OPEC members including Russia voted unanimously to pass the nine-month extension of their agreement to cut production by 1.2 million barrels per day in the last day of meetings in Vienna on Tuesday.

“They’re doing this because they’re worried about demand,” Olaf Hansen, head of commodity strategy at Saxo Bank, explained in a morning market call on Tuesday. “This is not from a position of strength; it’s from a position of weakness.”

Hansen added that oil producers had to keep a lid on production as long as demand is in doubt and while U.S. shale oil production continues to grow as it has been doing.

Even though markets found respite from a trade truce between the U.S. and China, Kathy Lien, strategist at BK Asset Management, stressed that a truce was not the same as a trade deal.

“Until tariffs on China are reduced or eliminated, the world's second-largest economy faces serious economic challenges,” she said.

The latest weekly data on U.S. crude inventories will likely shed light on the state of supply and demand amid expectations for a third consecutive draw.

The American Petroleum Institute will report its data on stockpiles at 4:30 PM ET (20:30 GMT) ahead of official government data out Wednesday.

In other energy trading, gasoline futures dropped 0.4% to $1.9225 a gallon by 7:23 AM ET (11:23 GMT), while heating oil fell 0.5% to $1.9434 a gallon.

Lastly, natural gas futures gained 0.4% to $2.276 per million British thermal unit.

New York-traded West Texas Intermediate crude futures fell 23 cents, or 0.4%, to $58.86 a barrel by 7:21 AM ET (11:21 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., also lost 23 cents, or 0.4%, to $64.83.

All OPEC and non-OPEC members including Russia voted unanimously to pass the nine-month extension of their agreement to cut production by 1.2 million barrels per day in the last day of meetings in Vienna on Tuesday.

“They’re doing this because they’re worried about demand,” Olaf Hansen, head of commodity strategy at Saxo Bank, explained in a morning market call on Tuesday. “This is not from a position of strength; it’s from a position of weakness.”

Hansen added that oil producers had to keep a lid on production as long as demand is in doubt and while U.S. shale oil production continues to grow as it has been doing.

Even though markets found respite from a trade truce between the U.S. and China, Kathy Lien, strategist at BK Asset Management, stressed that a truce was not the same as a trade deal.

“Until tariffs on China are reduced or eliminated, the world's second-largest economy faces serious economic challenges,” she said.

The latest weekly data on U.S. crude inventories will likely shed light on the state of supply and demand amid expectations for a third consecutive draw.

The American Petroleum Institute will report its data on stockpiles at 4:30 PM ET (20:30 GMT) ahead of official government data out Wednesday.

In other energy trading, gasoline futures dropped 0.4% to $1.9225 a gallon by 7:23 AM ET (11:23 GMT), while heating oil fell 0.5% to $1.9434 a gallon.

Lastly, natural gas futures gained 0.4% to $2.276 per million British thermal unit.

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