Oil prices extended the previous session’s sharp losses on Wednesday, even after a report showed U.S. crude inventories fell more than expected, as weak economic data raised recession fears for the world’s biggest economy.
Brent crude fell by 95 cents, or 1.2%, to $79.82 a barrel by 1:16 p.m. EDT (1716 GMT) while U.S. West Texas Intermediate crude lost 69 cents, or 0.9%, to $76.38.
Energy Information Administration (EIA) data showing U.S. crude inventories fell last week by 5.1 million barrels to 460.9 million barrels helped to limit the price fall, far exceeding analyst forecasts of a 1.5 million drop in a Reuters poll.
Gasoline and distillate stocks also drew down, sinking by 2.4 million barrels to 221.1 million barrels and almost 600,000 barrels in to 111.5 million barrels, respectively, the EIA said.
“Despite today’s chunky crude draw, prices remain in negative territory as demand concerns and recessionary fears overshadow the more supportive EIA data points,” said Matt Smith, lead oil analyst for the Americas at Kpler.
A forecast of higher refinery activity, but lower crude exports, will continue a push and pull for weeks, Smith said.
“Refinery runs are set to climb in the weeks ahead, boosting the demand side of the ledger, but countering this is the expectation of lower crude exports, as the tightening of the Brent-WTI spread weighs on buying appetite,” he said.
Oil prices have erased all their gains since the Organization of the Petroleum Exporting Countries (OPEC) and producer allies such as Russia, known collectively as OPEC+, announced in early April an additional output reduction until the end of the year.
Russian Deputy Prime Minister Alexander Novak said on Wednesday that OPEC+ remains an efficient tool for coordination.
Oil prices fell more than 2% on Tuesday amid lingering economic concerns and expectations of further interest rate hikes that could curtail fuel demand growth are countering signs of improving short-term consumption gains.
U.S. consumer confidence dropped to a nine-month low in April as worries mounted, heightening the risk of the economy falling into recession this year.
“This (data) will add credence to claims that the U.S. economy is edging closer to a recession,” said PVM Oil’s Stephen Brennock.
Investors also showed concern that potential interest rate hikes by inflation-fighting central banks could slow economic growth and dent energy demand in the United States, Britain and the European Union.
The U.S. Federal Reserve, the Bank of England and the European Central Bank are all expected to raise rates at their coming meetings. The Fed meets over May 2-3.
