Oil steadies after plunging nearly 4% on recession fears

All the gains made by the world's biggest crude benchmarks Brent and West Texas Intermediate since Opec+ surprise cuts earlier this month erased

A pump jack stands idle in Dewitt County, Texas. US crude stocks fell by 5.1 million barrels last week, according to the US Energy Information Administration. Reuters

Oil prices were steady on Thursday after recession concerns dragged futures lower by 4 per cent the previous day.

Brent, the benchmark for two thirds of the world’s oil, was trading 0.37 per cent higher at $77.98 a barrel at 4.01pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was up 0.34 per cent at $74.55 a barrel.

On Wednesday, Brent settled 3.81 per cent lower at $77.69 a barrel, while WTI was down 3.59 per cent at $74.30 a barrel.

"Crude oil has wiped out all of its gains after the surprise Opec+ production cut earlier this month, and now trading below its 50 and 100 day moving average, with recessionary angst compounding a bearish technical correction," said Ehsan Khoman, head of emerging markets research for Europe, the Middle East and Africa at MUFG Bank.

"Accelerating the price drop is a technical correction known as a 'gap fill'. A sudden spike in prices – which occurred after Opec+ announced its unexpected production cut – created a breach in technicals where levels moving sharply with little trading in between. This gap has prompted a corrective move to fill the large break in prices."

Markets were also rattled as fears of a banking crisis were revived this week after California-based First Republic Bank disclosed that its deposits had plunged by about $102 billion during the first quarter.

The lender’s market capitalisation fell below $1 billion for the first time on Wednesday after a CNBC report said that US government officials were unwilling to intervene in the First Republic rescue process.

“Oil has been in free fall over a challenging economic environment, banking jitters, disappointment with China’s reopening, fears of overtightening by the US Federal Reserve, and on expectation Permian basin production has yet to peak,” said Edward Moya, senior market analyst at Oanda.

A large draw in US crude stocks lent support to futures on Thursday.

US commercial crude stocks fell by 5.1 million barrels last week, according to the US Energy Information Administration.

Analysts polled by Reuters were expecting a drop of 1.5 million barrels.

Petroleum stocks decreased by 2.4 million barrels last week, while distillate fuel inventories recorded a 600,000-barrel drop, according to EIA data.

US consumer confidence fell to a nine-month low in April, primarily due to a deteriorating economic outlook, according to a survey.

The Conference Board said its consumer confidence index fell in April to 101.3 — the lowest since July 2022 — from 104.0 in March.

“While consumers’ relatively favourable assessment of the current business environment improved somewhat in April, their expectations fell and remain below the level which often signals a recession looming in the short-term,” Ataman Ozyildirim, senior director of economics at the Conference Board, said.

Brent surged to nearly $88 a barrel earlier this month after Opec+ members announced voluntary crude production cuts of 1.16 million barrels per day on April 2.

The output curbs, which will be in place starting from May until the end of December, are aimed at supporting the stability of the oil market, producers said.

Russia, part of the 23-member alliance of crude producers, also said it would extend its output cut of 500,000 bpd until the end of this year.