Oil endures worst week since pandemic amid banking crisis By Investing.com
Commodities 50 minutes ago (Mar 17, 2023 03:17PM ET)
By Barani Krishnan
Investing.com – The crisis in U.S. banking isn’t abating and it’s dragging oil further and further down with it.
Crude prices tumbled on Friday for a fourth time in five days, finishing with their worst week since the outbreak of the coronavirus pandemic three years ago, which practically destroyed demand for oil.
The slump this time, however, had little to do with supply-demand but more with the crisis of confidence at banks which provide the liquidity for trading in crude and all other commodities. Persistent interest rate hikes by the Federal Reserve have also led to fears that the U.S. economy could end up in a deep recession.
“Crude prices remain heavy as banking turmoil won’t be going away anytime soon and over fears that the Fed’s rate hiking cycle is starting to take down the economy,” said Ed Moya, analyst at online trading platform OANDA.
New York-traded West Texas Intermediate, or WTI, settled down $1.61, or 2.4%, at $66.74 per barrel, after a 15-month low at $65.27. For the week, the U.S. crude benchmark was down 13%. It was WTI’s worst weekly decline since the back-to-back crash of nearly 20% ia week during the first two weeks of April 2020.
Near-term technical signals show more weakness for WTI, though volatility could limit the downside too, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“After today’s lows, oil bears have $64 and $62 on their radar next,” said Dixit. “But WTI’s consolidation above the 200-week Simple Moving Average of $66.18 could limit losses and start a short term rebound towards the resistance zone, which begins with 71.40 initially.”
London-traded Brent settled down $1.73, or 2.3%, at $72.97. The global crude benchmark earlier plumbed a session low of $71.44 and was down more than 13% on the week.
Moya said energy traders are not sure what could be a catalyst to raise oil prices given all the doom and gloom happening with short-term crude demand outlooks. Russian oil stockpiles were reported on Friday to be at their highest since April amid the sanctions imposed on Moscow for its February 2021 invasion of Ukraine.
“It seems that the oil bump that we got earlier in the month from China’s reopening was premature,” said Moya. “Clearly China’s recovery still needs more support. The Fed’s forecasts will closely be watched as that will signal if we are at a greater risk of a policy mistake. For now oil will remain heavy as traders try to figure out what type of recession policymakers will trigger in the U.S.”
The U.S. banking crisis began after two mid-sized lenders — Silicon Valley Bank and Signature Bank (NASDAQ:SBNY) — were rescued by the Federal Deposit Insurance Corp last week as depositors yanked billions of dollars from them after fearing about their solvency. Silicon Valley eventually filed for bankruptcy protection over the past 24 hours. A third bank, First Republic, is also in trouble despite receiving a $30 billion cash infusion from a consortium of banks.
Elsewhere, the banking crisis has spread to Europe, with Credit Suisse, one of the preeminent names in global investment banking, having to seek help from Switzerland’s central bank.
Oil endures worst week since pandemic amid banking crisis
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