Brent Oil Extends Drop Below $75 as Demand Concerns Escalate

(Bloomberg) — Oil fell below $75 a barrel for the first time since March, extending a 5% drop on Tuesday as the prospect of a US recession weighed on the outlook for demand and investors shunned riskier assets.

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Brent declined as much as 1.3% after closing at the lowest in more than five weeks. Crude fell along with other commodities as figures showed a cooling US labor market ahead of what’s expected to be the Federal Reserve’s final interest-rate hike in its current tightening cycle. Renewed concern about the US banking sector added to selling pressure.

Crude has had a rough ride in 2023 despite China’s reemergence from its restrictive Covid Zero policy and sizable cuts to supply by the Organization of Petroleum Exporting Countries and its allies including Russia. The retreat has been spurred by concerns that the US may be headed for a recession, and by Moscow’s ability to keep crude exports flowing amid the war in Ukraine.

“Despite current demand and growth concerns, the Fed is expected to hike once again later today, and it continues to weigh on 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 overshoot to the downside.”

In the US, data from the industry-funded American Petroleum Institute offered a mixed picture. Nationwide crude inventories contracted by almost 4 million barrels last week and distillate inventories also dropped, but there was a build in crude at the key Cushing, Oklahoma hub, according to people familiar with the figures. The official government data comes later on Wednesday.

In Russia, meanwhile, there is no sign of a sustained drop in crude flows out of the country. Exports jumped back above 4 million barrels a day in the week to April 28, a level surpassed only once since Moscow’s troops invaded Ukraine in February 2022, according to tanker-tracking data compiled by Bloomberg.