Oil prices extend losses as recession fears, inventories mount
TOKYO (Reuters) – Oil prices fell on Thursday to extend sharp overnight losses as U.S. crude inventories unexpectedly rose, fears of recession mounted and economic data out of China and Europe disappointed.
Brent crude (LCOc1) was down 39 cents, or 0.7%, at $59.09 a barrel by 0034 GMT, after falling 3% in the last session.
U.S. crude (CLc1) was down 28 cents, or 0.5%, at $54.95 a barrel, having dropped 3.3% in the previous session.
The combination of a slew of data suggesting a slowdown in global growth amid the U.S.-China trade war and persistently high levels of oil in U.S. storage has punctured recent optimism in crude markets, stoking expectations leading oil producers may take further steps to support prices.
“This latest collapse in prices is likely to put further pressure on Saudi Arabia,” ANZ said in a note. “It has already hinted at cutting production to arrest the falls.”
The Organization of the Petroleum Exporting Countries has been mostly trimming production since the start of 2017 and traders say they expect Saudi Arabia to reduce output further amid slowing global oil demand.
The U.S. Treasury bond yield curve inverted for the first time since 2007, a sign of investor concern that the world’s biggest economy may fall into recession.
China reported disappointing data for July, including a surprise drop in industrial output growth to a more than 17-year low, underlining widening economic cracks as the trade war with the U.S. intensifies.
Global economic worries, amplified by tariff conflicts and uncertainty over Brexit, are also hitting European economies. A slump in exports sent Germany’s economy into reverse in the second quarter, data showed, while the euro zone’s GDP barely grew in the second quarter of 2019.
A second week of unexpected builds in U.S. crude inventories is adding to the pressure on oil prices.
U.S. crude stocks grew by 1.6 million barrels last week, compared with analyst expectations for a decrease of 2.8 million barrels, as refineries cut output, the Energy Information Administration (EIA) said in a report.
At 440.5 million barrels, inventories were about 3% above the five-year average for this time of year, the EIA said.