Investing.com -- Oil prices fell Tuesday as concerns over the global economic outlook overshadowed the impact of Saudi Arabia’s surprise announcement of additional production cuts.
By 08:25 ET (13:25 GMT), U.S. crude futures traded 1.9% lower at $70.77 a barrel, while the Brent contract fell 1.7% to $75.42 a barrel.
Both benchmarks soared as much as 3% on Monday after Saudi Arabia, the world's top exporter, said at the weekend its output would drop by one million barrels per day in July in an attempt to boost crude prices.
Saudi Arabia followed up Tuesday by increasing its export prices for all regions for July, selling its Arab Light crude for buyers in the crucial Asian region at a $3 a barrel premium, an increase of around 45 cents a barrel compared with June.
“The hike in premium comes as a surprise considering ongoing demand concerns and that Saudi Arabia has been pushing for supply cuts to bring the oil market into balance,” according to analysts at ING, in a note.
Any enthusiasm generated by the Saudi move has quickly worn off as traders worried about weaker demand, given the potential of recessions in the U.S. and Europe, and lower growth in China.
Data released earlier Tuesday showed that German factory orders unexpectedly fell in April, illustrating the difficulties Europe’s largest economy is having after it endured the first recession since the pandemic over the winter.
Weak U.S. services data, released Monday, also raised further concerns about a slowdown in the world’s largest consumer.
Additionally, both the Federal Reserve and the European Central Bank meet next week and could hike interest rates once more as inflation remains an issue, further depressing economic activity.
The American Petroleum Institute, an industry body, releases its estimate of last week’s U.S. crude stocks later in the session, as a precursor to the official data from the Energy Information Administration on Wednesday.
China's May trade data on Wednesday will also give fresh demand indications for the world's second-largest oil consumer.