Investing.com– Oil prices fell to four-month lows Tuesday, extending losses after the OPEC+ signaled it will begin tapering off its production cuts this year, while weak economic data raised concerns about sluggish demand.

At 08:35 ET (12:35 GMT),  fell 1.4% to $77.25 a barrel, while dropped 1.6% to $73.05 a barrel.

Both contracts slid over 3% on Monday, and were at their lowest level since early-February. 

OPEC+ move to begin scaling back production cuts seen as bearish 

The Organization of Petroleum Exporting Countries and allies, a group known as OPEC+, announced after a weekend meeting that it will maintain 3.6 million barrels per day (bpd) of production cuts until the end of the year.

But the cartel but left room its members to gradually unwind 2.2 million bpd of voluntary cuts from the end of September 2024.

“The market was expecting them to remain in place until the end of the year. This saw tumble… as investors weigh up rising supply against an uncertain economic backdrop,” analysts at ANZ wrote in a note. 

OPEC+ made it clear that the return of these barrels to the market can be paused if market conditions do not allow for this additional supply,” analysts at ING said, in a note. “However, one must question how long some members will be willing to hold a substantial amount of supply from the market and give market share away to non-OPEC+ producers.”

Weak PMI data, mixed China cues spark demand fears 

News of this potential increase in supply came as crude markets were already spooked by weak data from the U.S., which showed manufacturing activity in the country contracted for a second consecutive month in May.

The reading raised concerns that sticky inflation and high interest rates were chipping away at economic activity in the world’s biggest fuel consumer, likely impacting future demand.

Focus this week is on key U.S. labor market readings from the country, which are expected to factor into the outlook for interest rates. 

Additionally, the issues its weekly estimate if stockpiles later in the session, ahead of the official reading on Wednesday. 

Mixed PMI readings from top oil importer China also weighed on sentiment, after released last week showed an unexpected contraction in the country’s manufacturing sector. 

In addition to concerns over the OPEC+ and weak demand, oil traders were also seen pricing out a risk premium from crude after the U.S. attempted to broker a ceasefire between Israel and Hamas, which could herald more stable geopolitical conditions in the Middle East.

(Ambar Warrick contributed to this article.)