Oil prices continue to face downward pressure, extending sharp losses from the previous session, even after a report showing that U.S. inventories fell last week.
Brent crude oil, the international benchmark for Nigerian oil, fell by $1.31, or 1.6%, to $79.46 a barrel 3:00 pm, breaking below the $80 mark for the first time since March 31. While, the U.S. West Texas Intermediate crude fell 99 cents, or 1.3%, to $76.08.
The oil market is responding to a series of weak U.S. data that raised fears of a recession in the world’s biggest economy. This includes U.S. consumer confidence that dropped to a nine-month low in the month of April as most Americans were worried the economy is gradually plunging into a recession this year.
Investors are also concerned that potential interest rate hikes by inflation-fighting central banks could slow economic growth and dent energy demand in the United States, Britain, and the European Union.
The U.S. Federal Reserve, the Bank of England, and the European Central Bank are all expected to raise rates at their coming meetings.
Oil prices have erased all their gains since the Organization of the Petroleum Exporting Countries (OPEC) and producer allies such as Russia, known collectively as OPEC+, announced in early April an additional output reduction until the end of the year.
However, Russian Deputy Prime Minister Alexander Novak said on Wednesday that OPEC+ remains an efficient tool for coordination on global oil markets.
While a report showing a fall in U.S. oil stocks limited losses, especially on WTI, the overall sentiment is bearish due to economic concerns.
Analysts had expected crude inventories to fall by about 1.5 million barrels, but market sources citing American Petroleum Institute (API) figures on Tuesday showed that U.S. crude oil stocks fell by about 6.1 million barrels in the week ended April 21.
As the oil market continues to navigate through economic uncertainty, it remains to be seen how OPEC+ will respond in the coming months to support oil prices.