Oil rebounded a bit on Thursday after falling to 15-month lows in the previous session as markets calmed somewhat after Swiss regulators gave Credit Suisse a financial boost.
But market sentiment remained fragile on Thursday, frayed by fears of a possible deepening crisis for banks around the world.
As of 0427 GMT, Brent crude futures were up 58 cents, or 0.8%, to $74.27 a barrel. West Texas Intermediate crude futures (WTI) rose 51 cents, or 0.8%, to $68.12 a barrel.
On Wednesday, the third consecutive day of declines, WTI crude fell below $70 a barrel for the first time since December 20, 2021.
Brent has lost about 10% since Friday’s close, while WTI crude is down about 11%.
Market sentiment worsened as the banking crisis spread from the US to Europe. Credit Suisse announced on Thursday that it will borrow up to $54 billion from the Swiss central bank to bolster its liquidity and investor confidence after a drop in its shares raised fears over a global financial crisis. The future trend will depend on the level of market anxiety, even if the fundamental indicators are not showing many bearish signs.
There is no doubt that OPEC’s more optimistic outlook on China’s oil demand will support oil prices.
OPEC upgraded its Chinese demand forecast for 2023 earlier this week, and the International Energy Agency’s (IEA) monthly report on Wednesday pointed to the expected increase in oil demand as air travel resumed after abandoning the zero-COVID policy and China’s economic reopening.
But oversupply concerns remain.
The IEA report said commercial oil inventories in advanced OECD countries reached an 18-month high, with Russia’s oil production remaining close to pre-war levels in February despite sanctions on maritime exports.
U.S. crude inventories also increased by 1.6 million barrels last week, beating analysts’ expectations for a 1.2 million barrel increase, the Energy Information Administration (EIA) said on Wednesday.
Later on Thursday, European Central Bank policymakers appear to be heading for a half-point rate hike as the eurozone economy strengthens and inflation prepares to remain high for years.
Higher interest rates can reduce oil demand as economic growth slows, and the concerns about a widening financial crisis for the banking sector could also depress oil demand.