(Bloomberg) -- Oil fell for the third straight day as weak demand data from the US added to concerns that the global economy is heading toward recession.

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The recent skid, which has brought West Texas Intermediate down about 14% for the year, shows that a plan by OPEC and its allies to regain control of the market by cutting production starting this month isn’t yet working. Brent’s prompt-spread, which reflects the price difference between July and August futures, has narrowed to a premium of 16 cents. That’s down from a premium of 43 cents at the start of the week, suggesting that traders see near-term supply outstripping demand.

“This is the toughest knife to catch since the pandemic-era rally,” said Daniel Ghali, a commodity strategist at TD Securities. The deterioration in Brent’s timespread suggests a “significant slump in commodity demand expectations, with traders implicitly expecting that we are crash-landing. This is the first time that recessionary concerns have begun to be priced into energy markets.”

Meanwhile, momentum-driven accounts, such as those overseen by commodity trading advisors, have exacerbated volatility, with estimates showing they are maxing out short bets. Looking ahead, markets will be watching the Federal Reserve, which is projected to boost rates 25 basis points Wednesday and signal a pause in its aggressive tightening campaign.

Gasoline Demand

In the US, a government report Wednesday showed gasoline demand contracting and fuel supplies swelling. Jet fuel demand also dropped, while remaining slightly above year-earlier levels.

On the supply side, Russia has shown no signs of a sustained drop in crude flows out of the country, despite its pledge to cut production by 500,000 barrels a day. Exports jumped back above 4 million barrels a day in the week to April 28, a level surpassed only once since the country’s troops invaded Ukraine in February 2022, according to tanker-tracking data compiled by Bloomberg.

However, there are concerns that Iran’s seizure of a second oil tanker in a week may disrupt shipping in one of the world’s most important trade routes. Pipeline shipments from Iraq’s north and its Kurdish region to the Turkish port of Ceyhan remain idled due to a dispute between the two nations.

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