Tokyo, June 7 (BNA): Oil extended losses on Wednesday as concerns about headwinds from the global economy exacerbated, erasing price gains booked after top crude exporter Saudi Arabia pledged over the weekend to deepen production cuts.
Brent crude futures fell 40 cents, or 0.5 percent, to $75.89 a barrel at 04:56 GMT. US West Texas Intermediate crude futures fell 35 cents, also 0.5%, to $71.39 a barrel, Reuters reported.
The two benchmarks jumped more than a dollar on Monday, supported by Saudi Arabia’s decision over the weekend to cut production by one million barrels per day to nine million barrels per day in July.
“Recession fears, as more and more dismal economic readings point towards a slowdown, have kept a lid on oil prices, eroding all of OPEC+’s efforts to keep prices afloat,” Priyanka Sachdeva, an analyst at Philip Nova, said in a note.
Gasoline inventories in the United States rose by about 2.4 million barrels and distillate inventories increased by about 4.5 million barrels in the week ending June 2, market sources said on Tuesday, citing figures from the American Petroleum Institute.
The unexpected buildup of inventories has raised concerns about fuel consumption by the world’s largest oil consumer, especially as travel demand grew over the Memorial Day weekend.
Meanwhile, the US Energy Information Administration (EIA) said on Tuesday that US crude oil production this year will rise faster and that increased demand will subside compared to previous expectations.
“The market has digested the news of Saudi production cuts and investors are now reluctant to take a big stance due to the divergent economic outlook and indicators in the US and China,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities. .
Chinese official data showed on Wednesday that its exports contracted much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.
However, some analysts predicted that Saudi Arabia’s voluntary cut, the largest in the kingdom in years, would put a floor in oil prices, although it was unlikely to support a sustainable increase in prices into the high range of the 80s and 90s per barrel.
“We expect oil prices to test the upward trend as we enter the summer driving season in the United States,” Kikukawa said, adding that tightening global supply and US plans to buy crude to replenish the Strategic Petroleum Reserve would limit the downside.
HF