Oil toils: Crude prices tumble as global banking chaos triggers recession fears
Both major oil benchmarks have plummeted in this morning’s trading, with investors spooked over the instability in the banking sector.
The collapse of Silicon Valley Bank and the abrupt takeover of Credit Suisse from rival UBS has rattled markets, raised the prospect of a recession and lowered expectations from investors for global oil demand – weighing down prices.
Brent Crude was down 2.88 per cent in this morning’s session, trading at $70.87 per barrel while WTI Crude slipped 2.89 per cent, priced at $64.81 per barrel.
This follows an 11 per cent drop in prices last week, which has seen oil trade at its lowest levels since December 2021.
For context, oil prices climbed to a 14-year high of $139 per barrel last March following Russia’s invasion of Ukraine – and remained above the $100 milestone for most of last summer.
There is also the looming possibility of another hike in US interest rates this week from the hawkish Federal Reserve – with central banks aiming to stabilise the sector.
The Fed is expected to raise interest rates 25 basis points when it meets later this week, according to economists polled by news agency Reuters.
Meanwhile, the ministerial committee of OPEC and producer allies including Russia – known as OPEC+ – is set to meet next month.
The organisation had agreed in October to cut oil production targets by 2 million barrels per day until the end of 2023 and could pledge further reductions to prop up prices.
OPEC and the IEA both posted bullish oil updates this month, expecting demand to rise and outstrip supply in the second half this year amid China’s economic rebound from the pandemic – which they expected to override turmoil in the financial sector.
However as the crisis escalates, Goldman Sachs has slashed its forecasts for Brent crude.
It is now expecting the benchmark to average $94 a barrel in the next 12 months, and $97 in the second half of 2024, down from $100 previously.