MELBOURNE: Oil prices fell in early trade on Tuesday after weak Japanese industrial production data, not usually a market-moving factor, was enough to jangle trader nerves over a bumpy recovery in fuel demand as coronavirus pandemic restrictions ease.
U.S. West Texas Intermediate (WTI) crude CLc1 futures briefly traded higher then fell 38 cents, or 1%, to $39.32 a barrel by 0038 GMT, after climbing 3% on Monday.
Brent crude LCOc2 futures for September fell 32 cents, or 0.8%, to $41.53 a barrel, paring Monday’s 92-cent gain. There were no early trades on the August contract, which rose 69 cents on Monday and expires on Tuesday.
“Japanese industrial production data released this morning may take the gloss off the overnight moves,” CMC Markets strategist Michael McCarthy said in a note.
Japan reported industrial output for May fell 8.4% in May from the previous month, compared with market forecasts for a 5.6% decline.
Optimism on Monday had been based on strong growth in U.S. pending home sales, bolstering belief that global fuel demand is rising steadily as major economies reopen after coronavirus lockdowns, while the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, comply with production cut commitments.
Bulls will be looking for more signs of a demand recovery in data due on Tuesday from the American Petroleum Institute industry group, and from the U.S. government on Wednesday.
A preliminary Reuters poll showed analysts expect U.S. crude oil stockpiles fell from record highs last week and gasoline inventories decreased for a third straight week.
“The oil ‘perma bulls’ continue to buy the dips as their optimism stems from the fact that global demand is unambiguously on the rise,” AxiCorp global market strategist Stephen Innes said in a note.