- Recession fears continue to weigh on prices
- The dollar is at a 20-year high against the euro
- China has reported new cases of COVID-19 across the country
- Norwegian oil production affected by the strike will return within a few days
- Russian court orders the closure of the Caspian oil pipeline
LONDON (Reuters) - Oil prices fell on Wednesday in volatile trade, extending their sharp losses on Tuesday, as growing fears of a global recession overshadowed supply concerns.
Brent crude futures were down $1.33, or 1.29%, at $101.44 a barrel by 13:53 GMT, after rising more than $3 earlier in the session.
US West Texas Intermediate crude fell $1.80, or 1.81 percent, to $97.70, after rising more than $2 earlier today.
Both contracts posted their biggest daily declines since March on Tuesday, with West Texas Intermediate crude closing below $100 for the first time since late April.
Goldman Sachs said on Wednesday that the oil sell-off was due to mounting recession fears.
Oil prices were also affected by the return of the dollar, which maintained a 20-year high against the euro and a multi-month high against other major currencies.
A strong US dollar makes oil more expensive overall in other currencies, which may limit demand.
Renewed concerns about a possible COVID-19 lockdown in China may also limit oil price gains. Read more
Adding downward pressure on prices, Equinor (EQNR.OL) said on Wednesday that all oil and gas fields affected by the strike in the Norwegian oil sector are expected to fully resume operations within two days. Read more
But analysts expect oil prices to rebound quickly as supply continues to shrink, suggesting that spreads will persist in the first month despite Tuesday's drop.
The six-month market structure for Brent crude fell sharply to $14.55 a barrel, little changed from the day before. A pullback occurs when short-term oil delivery contracts are priced higher than those in subsequent months.
“Overnight price action, with both contracts trading in ranges near $15, indicates more panic and forced liquidation than a structural change in the tight global supply and demand situation,” said Jeffrey Haley, chief market analyst at OANDA.
Meanwhile, a Russian court has ordered the Caspian Sea Pipeline Consortium (CPC), which transports oil from Kazakhstan to the Black Sea via one of the world's largest pipelines, to suspend operations for 30 days, although sources said exports continued to sink. Read more
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