Oil prices drifted lower Tuesday, continuing the previous session’s losses on fears of a global economic slowdown hitting demand for crude in the second half of the year.
By 09:00 ET (13:00 GMT), U.S. crude futures traded 1% lower at $74.90 a barrel, while the Brent contract fell 0.9% to $78.60 a barrel.
Crude prices have continued to edge lower Tuesday after both benchmarks dropped more than 1% on Monday in the wake of Sunday’s data showing that activity in China’s important manufacturing sector slipped into contraction territory.
This was the first contraction in the manufacturing purchasing managers’ index since December, when the world’s largest crude importer started lifting its oppressive COVID-19 mobility restrictions.
The disappointing economic news continued Tuesday, as similar data showed that eurozone factory activity contracted further last month while the final U.K. manufacturing PMI index fell to a three-month low of 47.8 in April.
On top of this, expected interest rate hikes this week by a number of central banks are likely to further dent economic growth, weighing on demand for oil.
The Reserve Bank of Australia started the ball rolling with a surprise hike earlier Tuesday, and both the Federal Reserve and the European Central Bank are expected to follow suit in the coming days.
Turning to the supply side, Russia’s exports jumped back above 4 million barrels a day in the week to April 28, according to data compiled by Bloomberg.
This is a level that has only been achieved once before since Russia invaded Ukraine, and suggests that Moscow’s threatened oil output cut has yet to be carried out as there is no sign of a sustained drop in crude flows out of the country.
This puts the focus back onto the Organization of the Petroleum Exporting Countries, as their voluntary output cuts of just over 1 million barrels per day, which are taking effect in May, have not been enough to combat the perception of falling demand.
Elsewhere, data from the industry body American Petroleum Institute are due later in the session, and are expected to show another fall in U.S. crude inventories, dropping for a third consecutive week.
