(Bloomberg) -- Oil tumbled the most in a week as global financial markets swooned and swelling U.S. crude stockpiles reinforced fears about an economic slowdown.
Futures closed down 3.3% in New York on Wednesday, joining a slide in equities that saw 98% of the stocks in the S&P 500 Index drop. American crude inventories posted a surprise increase for the second straight week, U.S. data showed. That accelerated a flight from commodities and other higher-risk assets as sagging Treasury yields sounded alarm bells for a recession.
“People are panicking,” said Mark Waggoner, president of Oregon brokerage Excel Futures Inc. “They are saying ‘I can’t be long crude here if the economy is going to slow down.’ ”
Despite a late-session rebound, West Texas Intermediate crude for September settled $1.87 lower at $55.23 a barrel on the New York Mercantile Exchange. The contract slipped below its 50- and 200-day moving averages, a bearish harbinger.
Brent for October settlement decreased 3% to $59.48 on the ICE (NYSE:ICE) Futures Europe Exchange. The international benchmark traded at a $4.23 premium to same-month WTI futures.
Fears of a recession spread after the yield on 10-year U.S. Treasuries fell below the rate on the two-year for the first time since 2007. The S&P 500 dropped as much as 3%. A contraction in Germany’s economy and weak retail and industrial activity in China added to hints of a slowdown that could stall oil demand.
In the U.S., crude stockpiles grew by 1.58 million barrels, the U.S. Energy Information Administration said. It was the second straight week of surprise increases to inventories. Still, exports rebounded, gasoline stocks shrank and gasoline demand climbed to its highest in almost 30 years of record-keeping.
While the data can be volatile, “in general, a crude build on a day when there’s growing concern about a recession is not going to do anything good for oil prices,” said Rob Thummel, managing director at Tortoise, a Kansas firm that oversees more than $16 billion in energy assets.
The American stockpiles report puts more pressure on Saudi Arabia, which has pledged to cut exports to help stem the price rout, he said.
“I think OPEC knows they need to get their imports to the United States down,” he said.