Oil prices sank, with West Texas Intermediate plunging below $65 a barrel, as escalating investor concerns about a global banking crisis eroded appetite for risk assets including commodities.
Global benchmark Brent also dropped below $71 after plunging 12% last week to hit the lowest since December 2021. The rout came despite Swiss authorities orchestrating a rescue of Credit Suisse Group AG by UBS Group AG over the weekend. In addition, the Federal Reserve and five other central banks announced coordinated action to boost liquidity in US dollar swaps.
After trading in a tight range at the start of the year, crude has broken lower as the banking crisis, concerns over a global slowdown, and Russia’s ability to keep crude flowing despite a web of sanctions combined to undermine prices. The slump has raised the prospect of intervention from OPEC+, though some observers reckon that the group will stay on the sidelines for now.
WTI is now likely to find support near $62, while Brent could see a target of $65 a barrel, said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S.
“This has no longer anything to do with supply and demand,” he said. “It is purely driven by worries and short sellers can ride that wave until the general level of risk appetite show signs of stabilizing.”
Prices:
Brent for May settlement was 2.4% lower at $71.23 a barrel on the ICE Futures Europe exchange at 10:11 a.m. in London.
West Texas Intermediate for April delivery fell 2.5% to $65.05 a barrel on the New York Mercantile Exchange.
The more active May contract dropped 2.2% to $65.45 a barrel.
Last week’s sharp drop led one of the oil market’s most ardent bulls, Goldman Sachs Group Inc., to temper its optimism. The Wall Street giant no longer sees oil reaching $100 a barrel this year as recession fears bite.
The historic takeover of Credit Suisse followed client outflows and a massive rout in its stock and bonds. The lender’s troubles, which came after the collapse of smaller US lenders, triggered turmoil across financial markets last week, including in raw materials as investors shunned risk.
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