Oil prices fell on Wednesday, after rising in the morning, on growing concerns that a recession will hit fuel demand even as supply issues linked to the Ukraine crisis and the unrest in Libya and Iraq continue to affect the market.
Brent, the benchmark for two thirds of the world's oil, was trading 2.67 per cent lower at $96.66 a barrel at 5.42pm UAE time.
West Texas Intermediate, the gauge that tracks US crude, was down 2.05 per cent at $89.76 a barrel.
Oil prices fell more than 5 per cent on Tuesday on fears of sluggish demand amid growing signs of a an economic slowdown around the globe.
Brent ended the day 5.5 per cent lower at $99.31 a barrel while WTI slid 5.5 per cent to $91.64 a barrel.
“Oil prices are a little lower again for a second day, after spiking earlier in the week,” said Craig Erlam, senior market analyst for the UK, Europe, the Middle East and Africa at Oanda.
“It is a little indicative of the mood in the rest of the markets at the moment and the lack of certainty.”
Prices pulled back “amid reports that an Opec+ cut is not under consideration next week and as broader risk markets turned south”, he said.
Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview with Bloomberg last week that Opec and its allies would cut production if required to counter oil price volatility.
The group will meet on September 5 to decide on its future output policy.
Oil prices, which rose more than 67 per cent last year amid a faster-than-expected economic rebound, have been extremely volatile this year, rocked by the Russia-Ukraine conflict.
Brent is up about 30 per cent since the start of this year, having falling from a 14-year high when it was within touching distance of $140 a barrel in March after Moscow's invasion began, resulting in sanctions being imposed by the US and the UK on crude imports from Russia.
The expected global slowdown — due to the coronavirus pandemic, high inflation and the Ukraine conflict — is dragging down prices.
The International Monetary Fund lowered its growth forecast for the global economy to 3.2 per cent this year, from its previous projection of 3.6 per cent in April, due to the Ukraine war and the slowdown in China, the world’s second-largest economy.
“Economic concerns remain and may ensure trade continues to be volatile. API [American Petroleum Institute] also reported a small inventory build on Tuesday, while a small draw is expected from EIA [Energy Information Administration] later today,” Mr Erlam said.
“Given previous comments from Saudi Arabia, any significant pullback from $100 may be challenging.”
US crude stocks rose by about 600,000 barrels last week while both petrol and distillate inventories declined, according to API data.
Oil prices declined on Tuesday as the “global growth outlook continues to deteriorate and as geopolitical risks have yet to lead to any disruptions for crude exports”, said Edward Moya, senior market analyst for the Americas region at Oanda.
“To start the trading week, it seemed energy traders were anticipating some disruptions from either Iraq or Libya and so far, that doesn’t seem to be the case.”
Violence broke out in Iraq, Opec’s second-biggest producer, on Monday after Shiite cleric Moqtada Al Sadr said he was abandoning politics, although the situation had eased on Tuesday.
Despite the clashes, oil installations in Iraq, which exports about 3.3 million barrels per day, have not been affected and production is uninterrupted.
In Libya, at least 32 people were killed while 159 were wounded during clashes between supporters of two rival governments in the capital, Tripoli, on Saturday.
However, the Opec producer's oil output also does not seem to have be affected.
Global markets also have a US Federal Reserve “headache that has everyone bracing for further pain for households and businesses, while EU inflation data supports aggressive tightening that could send Europe into a severe recession”, said Mr Moya.
Fed chairman Jerome Powell indicated on Friday that interest rates increases could continue “for some time” as the central bank attempts to bring down record-high inflation.
American households and businesses would feel “some pain”, Mr Powell said at the Jackson Hole Symposium in Wyoming.
The US central bank raised interest rates by 75 basis points in its past two meetings and is expected to do so again when it meets from September 20 to September 21.
Meanwhile, EU inflation data is also supporting “aggressive tightening that could send Europe into a severe recession”, Mr Moya said.
“The oil market is still tight, so this downward move should not last much longer. If WTI crude easily breaks below the $90 level, bearish momentum could make this interesting and make a run for the August lows,” he said.