But one expert thinks prices could "easily" climb to $75 shortly: File Image/Pixabay
Despite reports of Russia cutting production and the Organization of the Petroleum Exporting Countries (OPEC) extending its output curbs, weak manufacturing data from the U.S. stoked fears of a slowing global economy - and oil prices plunged by 4.8 percent as a result.
Brent fell $2.61, or 4.01 percent, to $62.45 per barrel, while West Texas Intermediate plummeted $2.84, or 4.8 percent, to $56.25 per barrel.
Phil Flynn, senior marker analyst at Price Futures Group, tried to rationalize Tuesday's trading behaviour by saying, "There seems to be some disappointment that OPEC didn't make a larger production cut - or a sense that demand is really bad" - even though a preliminary Reuters poll showed U.S. crude oil stockpiles falling for a third consecutive week.
Amrita Sen, chief oil analyst, Energy Aspects
If demand growth is even 1 million barrels per day....we could easily be $75 if not slightly higher
Tamas Varga, analyst for PVM, agreed, noting, "It appears that the supply side of the oil equation is supportive for oil prices but demand concerns are forcing oil bulls to keep at least part of their gunpowder dry."
The latest source of traders' discontent was a report that factory activity shrank across much of Europe and Asia in June, while U.S. manufacturing activity slowed to near a three-year low; additionally, unease is said to have been generated by U.S. president Donald Trump stating that any trade deal with China would need to be somewhat tilted in favour of his country.
Still, some analysts, while acknowledging that economic figures are less than stellar, prefer to tread the middle ground in predicting what might happen next between the U.S. and China.
Amrita Sen, chief oil analyst at Energy Aspects, told media on Tuesday that "China [oil demand] hasn't collapsed at all, it's still growing slower, but it's just that lack of confidence, companies have just stopped investing and placing orders and we've seen very weak numbers out of other parts of Asia and Europe as well."
Sen went on to note that on one hand if a trade agreement isn't reached, "all of the second half [of 2019] and into 2020 things will be weak"; however, she conceded that a potential interest rate cut by the U.S. Federal Reserve and the incentive to forge strong economic growth in the U.S. ahead of the 2020 presidential election could provide extra impetus for demand.
Sen added, "There will be some momentum to solve some of these trade wars; if demand is good I think oil prices have a lot of upside here and into next year, [and] if demand growth is even 1 million barrels per day (bpd) I think we could easily be $75 if not slightly higher, because the physical crude market is still tight."
For his part, Khalid al-Falih, energy minister for Saudi Arabia, said he was growing more positive about the global economy after a G20 meeting of world leaders over the weekend, and he insisted that "I think we've seen good demand numbers and we've seen the U.S. pickup.
"I'm optimistic that there is a lot of goodwill between the U.S. and China and that will remove restraints on industrial productivity."
Meanwhile, Russia, which has repeatedly sent signals that it wants to pump full out, reported that its output last month fell by 278,000 bpd (from an October 2018 baseline of 11.41 mlllion bpd) to about 11.13 million bpd; the former Soviet Union had originally agreed with OPEC to cut 228,000 bpd.