Even after a report revealed that U.S. crude stocks decreased more than anticipated, oil prices plummeted by over 4% on Wednesday, adding to the previous session’s severe losses as concerns about the world’s largest economy’s impending recession deepened.
Brent oil lost $3.08, or 3.8 percent, to close at $77.69 a barrel. U.S. West Texas Intermediate oil fell $2.77 or 3.6 percent to end at $74.30 a barrel.
Data from the Energy Information Administration (EIA) indicating that U.S. oil stockpiles dropped last week by 5.1 million barrels to 460.9 million barrels, above analyst expectations of a 1.5 million reduction in a Reuters poll, helping to restrain the price decline.
The EIA said that the stockpiles of gasoline and distillate also decreased, falling by 2.4 million barrels to 221.1 million barrels and almost 600,000 barrels to 111.5 million barrels, respectively.
According to Jim Ritterbusch of the consulting firm Ritterbusch and Associates, “the complex appears more focused on a recession that may be well under way than on some recent EIA statistics that have generally been tilting bullish.”
The push and pull between increasing refinery output and fewer crude exports is expected to continue for weeks.
According to Matt Smith, principal oil analyst for the Americas at Kpler, “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.”
Since the Organization of the Petroleum Exporting Countries (OPEC) and producer allies like Russia, commonly known as OPEC+, agreed in early April a further production decrease through the end of the year, oil prices have lost all of their gains.
Alexander Novak, the deputy prime minister of Russia, said on Wednesday that OPEC+ is still a useful instrument for cooperation.
Tuesday saw a more than 2% decline in oil prices as persisting economic worries and anticipation of more interest rate increases, which might limit fuel demand growth, outweighed signals of stronger short-term consumption growth.
As concerns grew, U.S. consumer confidence hit a nine-month low in April, increasing the likelihood that the economy could experience a recession this year. Additionally, exports and new orders for important capital goods produced in the United States plummeted more than anticipated in March.
Stephen Brennock of PVM Oil said that the report will “add credence to claims that the U.S. economy is edging closer to a recession.”
Investors are also worried that prospective interest rate increases by central banks combating inflation might stifle economic development and reduce energy consumption in the US, UK, and the EU.
At their next meetings, the U.S. Federal Reserve, the Bank of England, and the European Central Bank are all anticipated to hike interest rates. May 1-2 sees a Fed meeting.