Oil prices drop amid supply concerns and weak economic data

Oil prices fell for a second day, with Brent down 0.1% and WTI down 0.19%. Concerns about Russian and Iranian supply amid sanctions prevented steeper losses.

Oil prices eased on Tuesday, extending losses into a second consecutive session after last week's rally, although concerns about tighter Russian and Iranian supply amid widening Western sanctions checked losses.

Despite worries about tighter Russian and Iranian supplies amid growing Western sanctions, oil prices dropped on Tuesday, extending losses into a second straight session following last week's gain.(Reuters)

Brent futures edged down 8 cents, or 0.1%, to $76.22 a barrel by 0452 GMT, while U.S. West Texas Intermediate (WTI) crude fell 15 cents, or 0.19%, to $73.42.

Both benchmarks slid on Monday, after rising for five days in a row last week to settle at their highest levels since October on Friday amid expectations of more fiscal stimulus to revitalise China's faltering economy.

"This week's weakness is likely due to a technical correction, as traders react to softer economic data globally that undermines the optimism seen earlier," said Priyanka Sachdeva, senior market analyst at Phillip Nova, referring to bearish economic news from the U.S. and Germany.

Also dragging on oil prices is the rising supply from non-OPEC countries that, coupled with weak demand from China, is expected to keep the oil market well supplied this year.

Market participants are waiting for more data this week, such as the U.S. December nonfarm payrolls report on Friday, for clues on U.S. interest rate policy and oil demand outlook.

"The move higher in crude oil prices appears to be running out of momentum," ING analysts wrote in a note.

"While there has been some tightening in the physical market, fundamentals through 2025 are still set to be comfortable, which should cap the upside."

Worries over tightening Russian and Iranian supply amid sanctions, however, kept a floor under oil prices.

The uncertainty has translated into better demand for Middle Eastern oil, reflected in a hike in Saudi Arabia's February oil prices to Asia, the first such increase in three months.

Money managers raised their net long U.S. crude futures and options positions in the week to Dec. 31, the U.S. Commodity Futures Trading Commission said on Monday.