Oil declines more as recession fears deepen

Oil prices fell 2% in early trade on Thursday, extending losses from the previous session, as investors were concerned that aggressive U.S. interest rate hikes may trigger a recession and cut gasoline use.

U.S. West Texas Intermediate (WTI) oil futures declined $2.39, or 2.3%, to $103.80 a barrel at 00:00 GMT. Brent oil prices sank $2.24, or 2.0 percent , to $109.50 a barrel.

On Wednesday, both indexes dropped about 3 percent, reaching their lowest levels since mid-May.

Investors continue to assess the degree to which they should be concerned about the likelihood of a global economic recession as central banks attempt to manage inflation through interest rate rises.

"Oil markets remained under pressure as investors concerned that rising U.S. interest rates will hinder the economic recovery and reduce gasoline demand," said Kazuhiko Saito, head analyst at Fujitomi Securities Co Ltd.

"U.S. and European hedge funds have begun selling their positions ahead of the end of the second quarter, further lowering market sentiment," he continued, predicting that the WTI might go below $100 per barrel before the July 4 holiday in the United States.

Jerome Powell, the chairman of the Federal Reserve, emphasized on Wednesday that the Fed is not aiming to engineer a recession in order to battle inflation, but is fully dedicated to bringing prices under control, even if doing so risks a recession.

In the meanwhile, U.S. President Joe Biden urged Congress to suspend the federal gasoline tax for three months to combat record pump prices and provide American customers with temporary relief this summer.

Sato of Fujitomi stated, "Even if the gasoline tax was suspended, retail prices would remain high, making it hard to increase demand."

The U.S. Energy Information Administration has delayed the release of its weekly oil figures until at least the next week due to system issues. Originally, the figures were scheduled to be disclosed on Thursday.