Oil eases as investors remain cautious on recession fears

By Yuka Obayashi

TOKYO, April 13 (Reuters) – Oil prices eased in early
trading on Thursday after rising for the previous two sessions
as investors remained cautious due to lingering concerns over a
U.S. recession and weaker oil demand.

Brent crude fell 19 cents, or 0.2%, at $87.14 a
barrel by 0116 GMT, while U.S. West Texas Intermediate
slid 16 cents, or 0.2%, to $83.10.

Both benchmarks rose 2% on Wednesday to their highest in
more than a month as cooling U.S. inflation data spurred hopes
that the Federal Reserve is likely to stop hiking interest
rates.

However, the previous tightening, which has lifted interest
rates to their highest since 2007, is increasing concerns that
the Fed’s focus on halting inflation may end up throttling
economic growth and future oil demand in the world’s biggest oil
user.

“The rally has ended due to worries that a possible U.S.
recession will weaken crude oil demand,” said Toshitaka Tazawa,
an analyst at Fujitomi Securities Co Ltd.

“WTI rose above $83 a barrel, near its highest technical cap
since last December, which also prompted a sense of caution
among investors,” he added.

The U.S. Consumer Price Index (CPI) climbed 0.1% last month,
below economists’ expectations for a 0.2% gain, and down from a
0.4% increase in February, raising expectations that the Fed is
likely to stop hiking rates after a possible increase in May.

However, the Fed’s staff assessing the potential fallout of
banking stress projected a “mild recession” later this year.

Markets on Wednesday shrugged off a small build in U.S.
crude oil stocks, attributing it in part to a congressionally
mandated release of oil from the U.S. emergency reserve and
lower exports at the start of the month.

Crude inventories rose by 597,000 barrels in
the last week, the Energy Information Administration said on
Wednesday, compared with analysts’ expectations in a Reuters
poll for a 600,000-barrel drop. Gasoline and distillate stocks
drew less-than-expected.

The Biden administration plans to refill the U.S. Strategic
Petroleum Reserve soon, and hopes to refill it at lower oil
prices if it’s advantageous to taxpayers during the rest of the
year, U.S. Energy Secretary Jennifer Granholm said on Wednesday.

Still, the oil market was jolted higher two weeks ago after
the Organization of the Petroleum Exporting Countries (OPEC) and
allies such as Russia agreed to curtail output.

As a result, the global oil market could see tightness in
the second half of 2023, which would push prices higher, Fatih
Birol, executive director of the International Energy Agency,
said on Wednesday.

(Reporting by Yuka Obayashi; Editing by Christian Schmollinger)
((Yuka.Obayashi@thomsonreuters.com; +813-4520-1265;))

Keywords: GLOBAL OIL/

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.