NEW YORK, Aug 27 (Reuters) – Oil prices fell about 2 percent on Tuesday on concerns that slowing economic growth in the United States and China could reduce energy demand, especially after prices rose more than 7 percent in the previous three days.
Brent futures fell $1.88, or 2.3%, to close 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 scope of a normal and deserved correction following a sharp three-day rise in oil prices of $6 a barrel,” analysts at energy consulting firm Ritterbusch and Associates said in a note.
Technical traders noted that prices of both contracts declined after failing to break resistance at the 200-day moving averages on Monday.
While U.S. gasoline futures are still trading near a six-month low, the 321 crack spread, which measures refinery profit margins, remained near its lowest level since February 2021 for the second day in a row.
“If the refinery is not making money from gasoline and distillate, it will buy less crude oil to make gasoline and distillate. The barrels it does not buy will be stored,” Bob Yawger, director of energy futures at Mizuho, said in a note.
In the US, consumer confidence rose to a six-month high in August. However, Americans are increasingly worried about the state of the labour market after the unemployment rate rose to a nearly three-year high of 4.3% last month.
Goldman Sachs cut its 2025 average Brent price forecast and price range by $5 a barrel, citing weaker demand in China. The bank reduced its Brent price range to $70-$85 a barrel and its 2025 average Brent forecast to $77 a barrel from $82.
Concerns about the economies in the US and China offset positive news from Libya and the Middle East, which could lead to a decline in deliveries.
“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 … defend Hezbollah,” said Mizuho’s Yawger.
US OIL STOCKS
Weekly data on US oil reserves are expected on Tuesday from the trade group American Petroleum Institute and on Wednesday from the US Energy Information Administration.
This data is likely to reveal energy companies that last week took crude oil out of US storage for the eighth time in nine weeks.
However, analysts predicted that the decline in crude oil inventories in the week ending August 23 was only 2.3 million barrels.
If true, this withdrawal would be less than the 10.6 million barrel decline in the same week last year and the average decline of 6.3 million barrels over the past five years (2019-2023).
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Reporting by Scott DiSavino in New York, Paul Carsten in London, Colleen Howe in Beijing, Emily Chow in Singapore and Arunima Kumar in Bengaluru; Editing by David Goodman, Jonathan Oatis and David Gregorio
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