Oil prices fell on Tuesday, extending losses from the previous session. This marks a second consecutive day of decline following last week’s rally. While concerns over tightening Russian and Iranian supply amid Western sanctions helped limit the losses, broader market factors weighed on prices.

Brent futures dropped by 8 cents, or 0.1%, to $76.22 per barrel by 0452 GMT. Meanwhile, 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 consecutive days last week, settling at their highest levels since October. The previous rally was driven by expectations of fiscal stimulus to boost China’s slowing economy.

“This week’s weakness likely reflects a technical correction as traders respond to softer global economic data,” said Priyanka Sachdeva, senior market analyst at Phillip Nova. She referred to bearish economic news from the U.S. and Germany, which has undermined earlier optimism in the market.

Rising Supply and Weak Demand Weigh on Prices

Another factor pulling oil prices down is the rising supply from non-OPEC countries. This, combined with weak demand from China, is expected to keep the market well supplied throughout the year. The increasing supply from countries outside OPEC and reduced demand from China have raised concerns about the balance of supply and demand in the global oil market.

Traders are also awaiting more data this week, including the U.S. December nonfarm payrolls report, which could provide more insight into the outlook for U.S. interest rates and oil demand. Market participants are looking for any signs that could signal changes in oil prices, particularly as the U.S. Federal Reserve’s interest rate policy continues to evolve.

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Supply Concerns Support Oil Prices

Despite the overall market weakness, concerns over tightening Russian and Iranian oil supplies have kept oil prices from falling further. Western sanctions targeting these countries have contributed to a tightening of global supply, providing some support for prices.

These concerns have led to stronger demand for Middle Eastern oil. Saudi Arabia, for instance, raised its February oil prices to Asia, marking the first increase in three months. This move indicates that Middle Eastern producers are benefiting from the supply uncertainty created by sanctions on Russia and Iran.

Additionally, money managers increased their net long positions in U.S. crude futures and options in the week ending Dec. 31, according to the U.S. Commodity Futures Trading Commission. This suggests that investors continue to bet on oil price increases, even in the face of broader market challenges.

While oil prices face downward pressure from rising supply and weak demand, geopolitical factors related to Russian and Iranian production continue to provide a floor for prices, limiting the extent of losses in the market. The balance between supply, demand, and geopolitical concerns will likely continue to drive oil price fluctuations in the coming weeks.

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