Oil Steadies After Collapsing by 5% as Demand Concerns Escalate

(Bloomberg) -- Oil steadied in Asia after tumbling 5% on Tuesday as data pointed to a possible US recession and investors shunned risk assets.

Brent held above $75 a barrel 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.

“It would appear that macro trumps fundamentals, a trend which has become increasingly stronger in recent weeks,” said Warren Patterson, head of commodities strategy for ING Groep NV. “As for where the floor is for the market, $70 a barrel should provide good technical support for Brent.”

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. 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. 

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