West Texas Intermediate futures initially tanked by as much as 7.2% at the start of trading amid concerns that a looming US recession would hurt demand. The steep drop was pared, then overturned by mid-morning in Asia.

“It was panic selling again, amplified by algorithmic trading, no doubt,” said Vandana Hari, founder of consultancy Vanda Insights, referring to the selloff.

Oil has retreated 14% this year, showing that a plan by the Organization of Petroleum Exporting Countries and its allies to regain control of the market by cutting output from this month isn’t yet working. The losses have been driven by concerns that global growth is slowing, potentially hurting energy demand.

“Concerns about weakening economic growth in major economies saw commodities come under further downward pressure,” ANZ Group Holdings Ltd. analysts Brian Martin and Daniel Hynes said in a note. “Sentiment is likely to remain bearish in the oil market.”

Prices:

• WTI for June delivery rose 0.9% to US$69.21 a barrel at 9.37am in Singapore.
• Prices fell by as much as 7.2% in early trading.
• Brent for July settlement advanced 1.3% to US$73.24 a barrel.

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.

Oil has also come under pressure in 2023 as flows from Russia have proved to be more resilient than expected, despite a vow from Moscow to reduce supplies and a web of Western sanctions imposed after the invasion of Ukraine.

The US crude benchmark’s prompt spread — the difference between its two nearest contracts — has narrowed sharply in recent weeks, signalling that traders expect conditions to loosen. The gap was down to 1 cent a barrel in backwardation on Thursday compared with a peak of 20 cents last week.