TOKYO: Oil prices fell by 2 per cent in early trade on Thursday, extending losses from the previous day, as investors worried that US interest rate hikes could cause a recession and dent fuel demand.
The US West Texas Intermediate WTI crude futures fell by US $2.39, or 2.3 per cent, to $103.80 a barrel by 12.31 am GMT. The price of crude oil dropped $2.24, or 2 per cent, to $109.50 a barrel.
On Wednesday, both benchmarks fell by around 3 per cent to hit their lowest level since mid-May.
Investors are assessing how worried about central banks possibly pushing the world economy into recession as they try to curb inflation with interest rate increases.
Oil markets were under pressure because investors were worried that US rate hikes would stall an economic recovery and dampen fuel demand, said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.
He said the WTI could fall below $100 a barrel before the July 4 holiday in the United States, because of the US and European hedge funds selling off their positions ahead of the end of the second quarter.
The Federal Reserve is not trying to engineer a recession to stop inflation but it is fully committed to bringing prices under control, even if doing so risks an economic downturn, according to Jerome Powell, US central bank chief.
President Joe Biden called for a three-month suspension of the federal gasoline tax to help combat record pump prices and provide temporary relief for American families this summer.
The news temporarily boosted oil product prices, but later it was later viewed that even if the gasoline tax was suspended retail prices would remain high, making it difficult to stimulate demand, Fujitomi's Saito said.
The US Energy Information Administration said that its weekly oil data will be delayed due to systems issues until at least next week.