Oil prices fell more than $1 on Tuesday, extending the previous day’s slump as the collapse of the Bank of Silicon Valley shook stock markets and sparked fears of a new financial crisis.
Brent crude futures were down 87 cents, or 1.1%, at $79.90 a barrel at 0345 GMT. West Texas Intermediate crude futures (WTI) fell 85 cents, or 1.1%, to $73.93 a barrel.
On Monday, Brent fell to its lowest level since early January, while WTI fell to its lowest level since December.
The abrupt closure of Silicon Valley Bank triggered concerns about risks to other banks from the US Federal Reserve’s sharp rate hikes last year. It has also encouraged speculation about whether the central bank will slow the pace of monetary tightening.
US officials launched emergency measures Sunday to bolster confidence in the banking system after fears of the SVB’s failure may contaminate other banks led to sales in US assets late last week and state regulators also shut down New York-based Signature Bank.
Oil prices are also under pressure due to signs of weaker-than-expected economic recovery in China despite the lifting of strict COVID-19 restrictions, beyond the shock waves following the Silicon Valley Bank and Signature Bank.
While the market expected the Chinese economy to recover strongly, the February inflation rate was only 1% year-on-year, reflecting the current deflationary state of the Chinese economy and weak demand.
China’s statistics bureau released data last week showing that consumer inflation in the world’s second-largest economy fell to a one-year low in February.
To see the US supply situation, the American Petroleum Institute is expected to release industry data on US oil inventories on Tuesday.
Some analysts estimate crude oil inventories increased by about 600,000 barrels in the week to March 10.