Ana sayfa » Oil fell more than $2 on risks in the global banking sector and a possible hike in US interest rates this week

Oil fell more than $2 on risks in the global banking sector and a possible hike in US interest rates this week

US, European and other major central banks pledge to increase market liquidity and support other banks

by BUNKERIST

Oil slumped to a 15-month low on Monday ahead of a possible rise in US interest rates this week, amid concerns that risks in the global banking sector could lead to a recession that could lead to a decline in fuel demand.

Brent crude futures for May delivery fell $2.32, or 3.2%, to $70.65 a barrel at 0710 GMT. The contract previously slumped to $70.56, its lowest level since December 2021. Last week, Brent fell nearly 12%, its biggest weekly drop since December.

West Texas Intermediate crude (WTI) for April delivery fell $2.15, or 3.2%, to $64.59 a barrel. It previously dropped to $64.51, the lowest level since December 2021. The contract fell 13% last week, its most significant weekly drop since April.

The April contract expires on Tuesday, and the more actively traded May futures were also down 3.2% at $64.81 a barrel.

The slide in oil comes despite a historic deal that will see UBS, Switzerland’s largest bank, buying the country’s No. 2 lender Credit Suisse in an effort to stop a banking crisis from spreading.

Following the announcement, the US Federal Reserve, the European Central Bank and other major central banks pledged to increase market liquidity and support other banks.

The oil market focused on volatility in the banking sector and the Fed’s potential for further rate hikes. The upcoming OPEC meeting is a potential catalyst for the market outlook, however, the downside risk to prices raises the possibility that OPEC will cut production further to support prices.

According to most economists, the US Federal Reserve is expected to raise interest rates by 25 basis points on March 22, despite the recent banking sector turmoil.

Some executives are calling on the central bank to stop tightening monetary policy for now, later on increase interest rates. A slowdown in interest rate increases could depress the dollar and make dollar-denominated commodities such as crude oil more affordable for holders of other currencies.

Broader financial market concerns are likely to remain at the fore and volatility may continue this week. Also, there is the FOMC meeting this week which adds more uncertainty to the markets.

A ministerial committee made up of OPEC and its allies, including Russia, will meet on April 3, and a full ministerial meeting is scheduled for June 4.

The organization had agreed in October to lower its oil production targets by 2 million barrels per day by the end of 2023.