Bank Crises Raise Demand Fears To Fever Pitch, Oil Prices Plummet Again

by Ship & Bunker News Team
Thursday March 16, 2023

With the talk in financial circles almost exclusively focused on a potential bank crisis in the wake of the failure of Silicon Valley Bank, it was perhaps inevitable that the demand fears of crude traders would rise to a fever pitch on Wednesday – and rise they did, causing oil prices to plunge to their lowest in more than a year.

Brent plummeted $3.76, or 4.9 percent, to $73.69 per barrel, while West Texas Intermediate was down $3.72, or 5.2 percent, at $67.61, breaking through technical levels of $70 and $68 and extending the sell-off.

The fear was stoked when Credit Suisse's largest investor said it could not provide the Swiss bank with more financial assistance, and this sent its shares and other equities sliding; meanwhile, the White House's tepid and vague show of support to SVB clients only exacerbated an already perilously unsteady market.

Robert Yawger, director of energy futures at Mizuho, said, "It doesn't matter what your risk asset is: at this point people are pulling the plug across different instruments here."

Adding insult to injury, U.S. crude stockpiles rose by 1.6 million barrels last week, more than the expected rise of 1.2 million barrels.

Still, pockets of optimism continued to glow is some areas of the market: the International Energy Agency was said to have limited Wednesday's losses by flagging an expected boost to oil demand from China, in the wake of the Organization of the Petroleum Exporting Countries (OPEC) calculating that oil demand in that country will increase by 2.32 million barrels per day (bpd), or 2.3 percent, in 2023.

Also, Stacey Morris, head of VettaFi, said while oil prices would remain weak in the short term, it would be a buying opportunity for investors who have an eye on the long term.

Ed Moya, senior market analyst at Oanda, offered much-needed sober analysis by stating,  "The oil market is going to be stuck in a surplus for most of the first half of the year, but that should change as long as we don't see a major policy mistake by the Fed that triggers a severe recession.

"Now near the mid-$60s, WTI crude's plunge is at the mercy of how much worse the macro picture gets."

Moya added, "Longer-term views however still support having energy in your portfolios as a lot of the oil giants have robust balance sheets that support continued buybacks and dividends."