Oil prices tumbled around 3% on Wednesday as investors worried that rate hikes by the Federal Reserve could push the U.S. economy into recession, dampening demand for fuel.
Brent crude futures fell $2.91, or 2.5%, to settle at $111.74 a barrel. The global benchmark hit a session low of $107.03, its lowest since May 19.
U.S. West Texas Intermediate (WTI) fell $3.33, or 3%, to settle at $106.19 a barrel. The session low was $101.53, its lowest since May 11.
Investors assessed on Wednesday how interest rate hikes designed to cool soaring inflation might stall an economic recovery.
Oil prices pared losses, however, during the session after Fed Chair Jerome Powell pledged an "overarching focus" on bringing down inflation and reiterated that ongoing increases in the central bank's policy rate would be appropriate, with the pace depending on the economic outlook.
"Powell seemed to change the mood of the market by seeming confident about the U.S. economy," said Phil Flynn, analyst at Price Futures. "His words have soothed the market and put a bottom on prices for the short-term."
Meanwhile, U.S. President Joe Biden called on Congress to pass a three-month suspension of the federal gasoline tax to help combat record pump prices and provide temporary relief for American families this summer.
While lower pump prices could actually boost demand for fuel and support crude prices, PVM analyst Stephen Brennock said traders could be worried the Biden administration might take further measures to cool high energy prices.
Lawmakers of both major parties have expressed resistance to suspending the federal gasoline tax.
The White House asked the chief executives of seven oil companies to a meeting on Thursday to discuss ways to increase production capacity and reduce gasoline prices of around $5 a gallon.
Biden has publicly criticized Big Oil for banking big profits but he has rarely spoken directly to the heads of energy companies or their representatives, White House records and interviews with industry sources show.
Chevron CEO Michael Wirth said criticizing the oil industry was not the way to bring down fuel prices and the government should change its approach. Biden replied he was unaware oil executives could "get their feelings hurt that easily."
U.S. oil refining capacity fell in 2021 for the second year in a row, government data showed, as plant shutdowns kept whittling away on their ability to produce gasoline and diesel.
U.S. crude and gasoline inventories likely fell last week, a Reuters poll showed. Weekly oil data is delayed by Monday's public holiday, with industry data due on Wednesday at 4:30 p.m. (2030 GMT) and government data scheduled for Thursday at 11 a.m.
The $2.4 trillion set to be invested globally in energy this year includes record spending on renewables but falls short of plugging a supply gap and tackling climate change, the International Energy Agency said.