Americas News
Oil Ekes Out Modest Gains But Banking Jitters Remain Intense
Following observations from some analysts that last week's oil price rout due to banking and other fears was oversold, the commodity enjoyed a modest rebound on Monday – but jittery traders are still on the lookout for further signs that a financial collapse on a global scale is forthcoming.
Brent rose 73 cents, or 1 percent, to $73.70 per barrel, while West Texas Intermediate gained 73 cents, or 1.09 percent, to $67.47 per barrel.
UBS analysts noted that "during periods of elevated volatility, investors tend to pull out of risky assets like oil and invest in safer corners of the market," and they added that the options market is now intensifying the overall decline in oil prices through delta-hedging plays.
Phil Flynn, senior market analyst at Price Futures Group, added, "We're not moving at all on supply and demand fundamentals, we're just moving on the banking concerns."
Ironically, the concerns persist despite UBS, Switzerland's largest bank, agreeing to buy failed Credit Suisse, and the U.S. Federal Reserve, European Central Bank, and other major financial institutions pledging to enhance market liquidity and support other banks.
For its part, Goldman Sachs now expects Brent to hit $94 per barrel this year and $97 over the second half of 2024, compared with previous projections at $100 per barrel for both periods.
The bank stated, "Our adjustment also reflects somewhat softer fundamentals, namely higher-than-expected near-term inventories, moderately lower demand, and modestly higher non-OPEC supply."
If that outlook could be perceived as lukewarm, then the International Energy Agency was more forcefully upbeat in its market assessment, stating that it expects world oil demand growth to "accelerate sharply over the course of 2023," with "rebounding air traffic and the release of pent-up Chinese demand dominating the recovery."
As for circumstances sure to influence oil trading in the days ahead, the Federal Reserve is due to decide how much it will raise interest rates later this week, following the European Central Bank enacting a further rate hike of 50 basis points in an attempt to reign in rampant inflation.
