Oil Extends Losses as Threat of U.S. Recession Damps Sentiment

(Bloomberg) -- Oil extended losses on fresh signs that global growth may weaken further, overshadowing a drop in the number of American rigs exploring for crude to the lowest level in almost a year.

Futures in New York fell as much as 1.2 percent, after losing 1.6 percent Friday. A closely watched gauge of Treasuries inverted for the first time since 2007, a signal a recession may be coming in the world’s largest economy. The number of U.S. rigs dropped for a fifth week, according to data released Friday by Baker Hughes, easing concern over surging U.S. production.

Crude has retreated after reaching a four-month high on Thursday as disappointing global economic data and a lack of resolution to the U.S.-China trade war damped sentiment. The Organization of the Petroleum Exporting Countries and its allies commitment to curb output and supply disruptions in Venezuela and Iran are stopping prices from falling further.

“The risk-off sentiment is pressuring commodity prices,” said Kim Kwangrae, a commodities analyst at Samsung Futures Inc. in Soul. “Investors are worried about the potential for a long-term recession, and that’s pushing down expectations for future demand.”

West Texas Intermediate for May delivery lost 52 cents to $58.52 a barrel on the New York Mercantile Exchange as of 12:10 p.m. in Singapore after falling as much as 71 cents earlier. Prices declined 94 cents on Friday, paring the weekly gain to 52 cents, or 0.9 percent.

Brent for May settlement dropped 47 cents to $66.56 a barrel on the London-based ICE Futures Europe exchange. It lost more than 2 percent over the previous two sessions. The global benchmark crude was at a premium of $8.05 to WTI.

Asian stocks tumbled Monday after the gap between the 3-month and 10-year U.S. debt yields turned negative on Friday. The inversion came after an index of American manufacturing slowed, and factory output data from France and Germany was weaker-than-expected.

The number of American rigs targeting oil fell by 9 to 824 last week, taking the drop so far this year to 53. While some of the world’s largest oil companies have planned tens of billions of dollars in investment in the basin straddling West Texas and New Mexico, producers are under pressure from investors to focus on quality rather than quantity.

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