(Bloomberg) — Oil fell below $75 a barrel for the first time since March, extending its 5% decline on Tuesday as the prospect of a U.S. recession weighed on demand expectations and investors shunned riskier assets.
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Brent fell 1.3% after closing at its lowest level in more than five weeks. Crude Oil fell along with other commodities as numbers showed a slowdown in the US labor market ahead of what is expected to be the final Fed rate hike in the current tightening cycle. Renewed concern about the US banking sector added to the selling pressure.
Crude oil has had a rough road in 2023 despite China’s resurgence from restrictive Covid-Zero policy and deep supply cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia. The decline was driven by fears that the United States might be heading for a recession, and thanks to Moscow’s ability to keep crude exports flowing amid the war in Ukraine.
“Despite the current demand and growth concerns, the Fed is expected to rise again later today, and will continue to pressure the demand outlook,” said Ole Sloth-Hansen, Head of Commodities Strategy at Saxo Bank A/S. “With short sellers back in control, prices may once again cross to the downside.”
In the US, data from the industry-funded American Petroleum Institute presented a mixed picture. Nationwide crude oil inventories shrank by about 4 million barrels last week and distillate inventories also fell, but there was an increase in crude oil in the Cushing, Oklahoma hub, according to people familiar with the numbers. Official government data comes later on Wednesday.
Meanwhile, in Russia, there is no sign of a sustained decline in crude oil flows out of the country. Exports jumped again above 4 million barrels per day in the week ending April 28, a level it has surpassed only once since Russian forces invaded Ukraine in February 2022, according to tanker-tracking data compiled by Bloomberg.
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