Oil steadies after slumping 5% as demand concerns escalate

Oil plunged for a second day, dipping below $70 a barrel in New York as the prospect of a US recession triggered a flight from riskier assets and threatened to curb fuel demand.

“Fears of a wider economic slowdown” are driving the market, Joe DeLaura, senior energy strategist at Rabobank, said in a note. Brent crude, which was trading near $80 a barrel on Tuesday, will be the next to test $70, he said.

Crude has had a rough ride in 2023 despite China’s reemergence from its restrictive Covid Zero policy and sizable reductions in supply by the Organization of Petroleum Exporting Countries and its allies. Those surprise cutbacks, announced just a month ago, were supposed to seize back control of the market from bearish speculators. Instead, a brief rally in April has fizzled

“With short sellers back in control, prices may once again overshoot to the downside,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank A/S. “The Fed is expected to hike once again later today, and it continues to weigh on the demand outlook.”