Oil continues its losses as fears of an economic slowdown return

Oil prices extended losses on Wednesday as fears of headwinds from the global economy exacerbated gains gained after top crude exporter Saudi Arabia pledged earlier this week to deepen production cuts.

Brent crude futures fell 40 cents, or 0.5 percent, to $75.89 a barrel by 0456 GMT. US West Texas Intermediate crude futures also fell 35 cents, or 0.5 percent, to $71.39 a barrel.

The two benchmarks jumped more than a dollar on Monday, supported by Saudi Arabia’s decision on Sunday to cut production by one million barrels per day to nine million barrels per day, starting in July.

“Recession fears have kept oil prices constrained as more and more bleak economic readings point to a slowdown, squandering all OPEC+ efforts to maintain the price level,” Priyanka Sachdeva, an analyst at Philip Nova, said in a note.

On Tuesday, market sources quoted data from the American Petroleum Institute that 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 2nd.

The unexpected increase in inventories raised concerns about fuel consumption in the world’s largest oil consumer, at a time when travel demand is growing during a weekend that includes a public holiday there.

And the US Energy Information Administration said on Tuesday that US crude oil production this year will rise faster and that the increase in demand will subside compared to previous expectations.

Chinese official data on Wednesday showed that China’s exports contracted much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to attract demand from abroad and domestic consumption remained sluggish.

However, some analysts expected that the voluntary cut by Saudi Arabia, the largest in the kingdom in years, would put an end to the drop in oil prices.