The Worst Week Of The Year So Far For Oil Prices
Crude oil prices are about to end their worst week since the start of the year as news from the banking industry ignited fears of demand depression.
As of Friday morning, West Texas Intermediate was down by about 10% for the week. Brent crude was also down considerably, dropping from $83 per barrel on Monday to less than $76 per barrel at the time of writing.
The rout began early in the week, after last Friday’s collapse of Silicon Valley Bank. The subsequent demise of Signature Bank added fuel to fears of an impending meltdown in finance, and news of liquidity troubles at Credit Suisse, one of the world’s largest lenders, did not help.
The flood of bad banking news continued throughout the week despite assurances from President Biden and Treasury Secretary Yellen that the U.S. banking system was sound and safe.
The end of the rout came after a meeting between Saudi Arabia and Russia to discuss measures to stabilize the market.
“That news woke up the bulls in the market, and it was kind of expected with the sell-off that we have seen over the past few sessions,” John Kilduff from Again Capital told Reuters.
“Market sentiment remains fragile as investors continue to weigh up the latest developments in the banking sector both in the U.S. and in Europe,” City Index analyst Fiona Cincotta told Reuters.
According to ING’s head of commodities strategy, who spoke to Bloomberg, “External factors continue to dictate price action for oil. The scale of the selloff in oil will likely be a concern for OPEC+, but they are unlikely to take quick action, instead they will probably wait for the dust to settle.”
OPEC+, for its part, demonstrated calm, attributing the price drop to financial industry fears, with several delegates telling Reuters that they expected the situation to normalize soon as it was not caused by any change in the balance between supply and demand.