Oil Drops But Notches Weekly Gains As Traders Brave Macroeconomic Headwinds

Meanwhile, Standard Chartered anticipates price escalation moving forward: File Image/Pixabay

The roller coaster ride that defines crude trading in 2023 took a downward plunge on Friday with banking fears returning and a delayed negative reaction to the White House previously stating it may take several years to replenish the U.S.'s Strategic Petroleum Reserve.

Brent settled down 92 cents to $74.99 per barrel and West Texas Intermediate settled down 70 cents to $69.26 per barrel; however, the benchmarks notched weekly gains, with Brent futures rising 2.8 percent and U.S. crude futures rising 3.8 percent – a substantial rise made possible in part due to both futures last week posting their biggest declines in months.

The daily losses occurred after stocks of Deutsche Bank tumbled 8.5 percent and the institution stated it would redeem $1.5 billion of Tier 2 notes due in 2028.

Also, shares of UBS Group and Credit Suisse fell 3.6 percent and 5.2 percent respectively, after Bloomberg reported they were among final institutions being examined by the U.S. Department of Justice to determine if financial professionals helped Russian leaders evade sanctions.

However, the European Union stressed that its lenders were well capitalised and liquid.

John Kilduff, founding partner at Again Capital, said of Friday's crude trading, "We're riding along macroeconomic headwinds, and there's a newfound correlation with equities."

However, Rebecca Babin, senior energy trader at CIBC Private Wealth, added, "Fear around a recession and skittish trading keep many investors in wait-and-see mode."

Still, bullish signals dominated this week's trading: they included U.S. exports of crude and refined products climbing to a record 12 million barrels per day (an excellent sign of robust demand), and Russia extending its 500,000 bpd crude output cut through June.

For its part, Standard Chartered said oil prices will point higher and not lower moving forward; this is a reversal of their earlier sentiment that prices might retest lows if the Federal Open Market Committee hiked its rate by more than the widely expected margin of 25bps.