Oil Ends Volatile Day Lower as Yield-Curve Jitters Linger

(Bloomberg) -- Oil prices fell for a second day as anxious traders weighed signs of a slowdown in the U.S. economy against increasing tensions in OPEC member Venezuela.

Futures closed down 0.4 percent in New York after a day of whipsaw moves. Investors remained cautious after a closely watched gauge of U.S. Treasuries inverted on Friday, signaling a recession may be in the offing. More turmoil in Venezuela, where the U.S. warned Russia not to intervene, and a decline in the U.S. dollar weren’t enough to avoid the slide.

While global crude supplies are thinning, “we’re more sensitive to when the next recession is coming, given that the last one was so painful," said Cailin Birch, a global economist at the Economist Intelligence Unit in London. “It’s a sufficiently scary warning sign that it’ll continue to hang over the market."

U.S. crude has retreated after reaching $60 a barrel last week. Disappointing economic data and continued uncertainty over the U.S.-China trade war have dampened sentiment. That’s offset continued signs that the producer coalition led by the Organization of Petroleum Exporting Countries is committed to curbing output.

WTI for May delivery lost 22 cents to close at $58.82 a barrel on the New York Mercantile Exchange, reaching its lowest level since March 15. Prices declined 1.6 percent on Friday.

Brent for May settlement, by contrast, was up 18 cents to $67.21 a barrel on the London-based ICE Futures Europe exchange, after falling more than 2 percent over the previous two sessions. The global benchmark crude was at a premium of $8.39 to WTI.

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U.S. stocks shifted between gains and losses Monday, and European and Asian stocks tumbled after the gap between the 3-month and 10-year U.S. debt yields turned negative at the end of last week, the first time that had happened since 2007. The inversion came after an index of American manufacturing slowed and amid weaker-than-expected factory data from France and Germany.

Despite the economic warning signs, the threats to oil consumption seem “overpriced," said Phil Flynn, a senior market analyst at Price Futures Group Inc. in Chicago. U.S. unemployment remains low, gasoline demand has been robust and crude supplies look to get tighter in the coming months thanks to cuts by OPEC and its partners, he said.

“There’s no real sign if you look at the real economy of a recession happening any time soon," Flynn said. “Does the oil market care about that today? Probably not. But they are going to start to care about that in a few weeks when they start to see the inventories drawing down."

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