Oil drops back below $80 despite supply cuts

Oil fell below $80 a barrel for the first time in more than two months as fresh doubts on whether the Federal Reserve has finished tightening outweighed Saudi Arabia and Russia’s supply cuts.

West Texas Intermediate fell as much as 2.2%. Broader financial markets dropped and the dollar strengthened after a Fed official said it’s too soon to declare victory over inflation.

The slide comes after the market had been supported by supply cuts from OPEC+ leaders Saudi Arabia and Russia. Over the weekend the two nations said they would continue their curbs into the end of the year. But neither of those measures nor the war between Israel and Hamas have been enough to stem price declines driven by concerns about global consumption over the last couple of weeks.

“The market is completely discounting any risk of disruption coming from elevated geopolitical risks,” said Daniel Hynes, a commodity strategist at ANZ Group Holdings Ltd. 

Europe’s weak economic growth is weighing on manufacturing, cutting demand for diesel and naphtha, according to Wood Mackenzie Ltd. In China, state-owned oil refiners may be forced to reduce operating rates due to falling margins, industry consultant OilChem said.

Chinese crude imports rose 7% in October from the previous month, when they dropped 13%, according to data released Tuesday. Figures from the US later on Tuesday may provide further clues on demand. The Energy Information Administration will release its monthly energy outlook, while the industry-funded American Petroleum Institute will publish inventory estimates.