Recession fears sent Brent crude lower on Wednesday as the inverted US Treasury yield curve spooked global investors and sparked a widespread risk aversion. As a result, oil prices slipped to lows marginally above $58 and are clinging to the $59 handle early on Thursday.
Apart from a broad risk-off sentiment, Brent came under renewed bearish pressure amid rising dollar demand and disappointing EIA data. According to the official report, US crude oil inventories increased 1.6 million barrels in the week to August 9. The stockpiles rose for a second week in row as refineries continued to cut output. Now, inventories are about 3% above the five-year average for this time of year.
In the short term, oil prices could resume the downside move as the sentiment remains fragile, recession concerns persist, and the dollar could rise should the upcoming US retail sales data surprise to the upside. The technical picture has deteriorated after a break below the $60 handle. However, the potential sell-off will hardly drive the prices to lows below $56, with the pressure could be limited.