Investing.com - Crude oil prices settled sharply lower on Tuesday, as fears that a weaker global economic backdrop would keep a lid on oil demand offset an agreement by OPEC and its allies to extend their oil-production pact by a further nine months.
On the New York Mercantile Exchange crude futures fell 4.8% to settle at $56.25 a barrel, while on London's Intercontinental Exchange, Brent slumped 4.1% to $62.40 a barrel.
OPEC and its allies, including Russia, agreed on Tuesday to extend oil supply cuts until March 2020 in a bid to curb supplies and support oil prices.
The extension, however, was widely expected and does little to avert the threat of a supply surplus, with analysts at ING insisting that “the agreement for this extension was the bare minimum and it's not enough. We need a deeper cut in order to lift prices.”
"Weak demand means that we still expect the market to move into a surplus and oil prices to fall by end-2019," Capital Economics said. With global growth also expected to "continue to slow in the coming months," oil consumption will stutter and keep oil prices on the backfoot, the economic consulting firm added.
The fall in oil prices comes ahead of the of U.S. crude inventory data from the American Petroleum Institute later Tuesday as well as a further report from EIA due Wednesday.
Analysts forecast crude inventories fell by 2.964 million barrels in the week ended June 28, the third-straight week of declines.