Crude slides as SVB sparks fears of another crisis
London — Oil prices dropped more than $2 a barrel on Tuesday, extending the previous day’s slide, as the collapse of Silicon Valley Bank (SVB) rattled equities markets and sparked fears of a new financial crisis.
Brent crude futures fell $1.64, or 2%, to $79.13 a barrel by 10.01am GMT. US West Texas Intermediate dropped $1.74, or 2.3%, to $73.06 a barrel. On Monday, Brent and WTI fell to their lowest since early January and December, respectively.
“We see Monday’s developments around the regional US banks as more noise than news for commodity markets, and it should not have any meaningful medium- to longer-term impact,” said UBS analyst Carsten Menke.
The sudden shutdown of SVB Financial triggered concerns about risks to other banks resulting from the US Federal Reserve’s sharp interest rate hikes over the last year.
Traders no longer expect a 50-basis point rate hike next week, with a current projection of a 25 bps rise, even before of the release of US consumer price data later on Tuesday.
A lower rate rise could mean the dollar weakening, which is a bullish signal for oil prices.
Economists surveyed by Reuters forecast consumer prices increased by 0.4% in February, which would lower the year-on-year increase in the CPI to 6.0% in February and mark the smallest year-on-year rise since September 2021.
A stronger-than-expected US consumer inflation outcome could put further downward pressure on oil prices.
Consumer inflation in China, the world’s biggest oil importer, slowed to the lowest rate in a year in February.
The monthly oil market report by Opec is due later on Tuesday, before one prepared by the International Energy Agency (IEA) on Wednesday.
On the supply side, the American Petroleum Institute is expected to release industry data on US oil inventories at 8.30pm GMT.
Six analysts surveyed by Reuters estimate that crude inventories on average rose by about 600,000 barrels last week.