A view of the West Qurna-1 oilfield
File photo: A view of the West Qurna-1 oilfield near Basra, Iraq. Image Credit: REUTERS

LONDON: Oil fell 3 per cent to below $58 a barrel on Thursday, extending the previous session’s 3 per cent drop, pressured by mounting recession concerns and a surprise boost in US crude inventories.

In a sign of investor concern that the world’s biggest economy could be heading for recession, weighing on oil demand, the US Treasury bond yield curve inverted on Wednesday for the first time since 2007.

Global benchmark Brent crude fell as much as $1.81, or 3 per cent, to $57.67 a barrel and by 1117 GMT was down $1.57 at $57.91. US crude fell $1.03 to $54.20.

“The oil market has become a recession fear gauge,” said Norbert Ruecker of Swiss bank Julius Baer. “The North American market remains amply supplied with storage levels well above historical averages.” The price of Brent is still up 10 per cent this year thanks to supply cuts led by the Organization of the Petroleum Exporting Countries and allies such as Russia, a group known as Opec+.

In July, Opec+ agreed to extend oil output cuts until March 2020 to prop up crude. A Saudi official on Aug. 8 indicated more steps may be coming, saying “Saudi Arabia is committed to do whatever it takes to keep the market balanced next year.” But the efforts of Opec+ have been outweighed by worries about the global economy amid the US-China trade dispute and uncertainty over Brexit, as well as rising US stockpiles of crude and higher output of US shale oil.

“The market is becoming very anxious about global growth,” said Tamas Varga of oil broker PVM.

China reported disappointing data for July, including a surprise drop in industrial output growth to a more than 17-year low. A slump in exports sent Germany’s economy into reverse in the second quarter.

A second week of unexpected rises in US crude inventories is adding to the pressure.

US crude stocks grew by 1.6 million barrels last week, compared with expectations for a drop of 2.8 million barrels, the Energy Information Administration (EIA) said.

(Additional reporting by Aaron Sheldrick; editing by Jason Neely)