Oil prices slipped on Wednesday, extending sharp losses from the previous session, even after a report showed that U.S. inventories fell last week, as the market took stock of weak U.S. data that raised fears of recession in the world’s biggest economy.
U.S. West Texas Intermediate crude fell 88 cents, or 1.14%, to $76.24.
Brent drifted below $80 a barrel for the first time since March 31, just before the Organization of the Petroleum Exporting Countries (OPEC) and producer allies such as Russia, known collectively as OPEC+, announced 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 on global oil markets.
Oil prices dived 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 about the future 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.
A report showing a fall in U.S. oil stocks limited losses, however, especially on WTI.
U.S. crude oil stocks fell by about 6.1 million barrels in the week ended April 21, according to market sources citing American Petroleum Institute (API) figures on Tuesday. Analysts had expected crude inventories to fall by about 1.5 million barrels.
Gasoline inventories fell by 1.9 million barrels last week while distillate inventories rose by 1.7 million barrels, the sources said. Official stockpiles data from the U.S. government is due on Wednesday.
U.S. crude oil stockpiles have been falling since the middle of March as refineries have increased runs to produce more gasoline ahead of the peak summer demand period that starts in May. This has pushed WTI futures prices into backwardation, when prompt futures are higher than later-dated futures, reflecting the higher refinery demand.