Oil prices fell on Friday, reversing early gains of more than $1 a barrel as banking sector fears caused both benchmarks to hit their biggest weekly drops in recent months.
Brent crude futures were down $1.73, or 2.3%, to $72.97 a barrel. West Texas Intermediate crude (WTI) fell $1.61, or 2.4%, to $66.74.
In session lows, both benchmarks dropped more than $3. Brent fell nearly 12% during the week, its biggest weekly drop since December. WTI futures fell 13% since Friday’s close, the biggest drop since last April.
While the underlying fundamentals are not as alarming as the pricing situation, there is concern that oil is not as safe a place as cash or gold,.
Oil prices, the banking sector crisis, and possible recession fears were observed by the stock market in deep concern.
Financial stocks and indices fell sharply in afternoon trading after Silicon Valley Bank (SVB) and Signature Bank collapsed and Credit Suisse and First Republic suffered.
Prices rallied somewhat after support measures from the European Central Bank and US lenders but fell again after SVB Financial Group announced it had filed for restructuring. The pressure stems from the continued fragile state of the market.
Analysts expect limited global supply to support oil prices in the near future.
OPEC+ members attributed the weakness in prices this week to financial factors rather than any supply and demand imbalances, adding that they expect the market to stabilize.
WTI’s drop below $70 a barrel this week for the first time since December 2021 could boost demand, encouraging the US government to replenish the Strategic Petroleum Reserve at low prices.
Analysts expect China’s demand recovery to provide price support as US crude exports to China in March hit their highest level in nearly two and a half years.
At a meeting, Thursday, Saudi Arabia and Russia reaffirmed their commitment to OPEC+’s decision last October to cut production targets by two million barrels per day by the end of 2023.
The OPEC+ monitoring panel will meet on April 3.