Crude oil prices fell back by more than 1% today, Wednesday, March 15 (2023), to continue bleeding losses for the third consecutive session, with continued fears of an economic recession following the collapse of the US Silicon Valley Bank.
Markets had some support in early trading today from OPEC’s strong outlook on Chinese demand, which offset the bearish global investor sentiment in the wake of recent US bank failures.
Early signs of a return to calm and stability faded after the largest investor in Credit Suisse said it could not provide more financial assistance to the Swiss bank, sending broader European stocks lower.
Crude oil prices today
By 11.38 am GMT (04:38 pm Mecca time), the prices of benchmark Brent crude futures – for May 2023 delivery – fell by about 1.32%, to reach $ 76.43 a barrel.
The price of US West Texas crude futures – delivery in April 2023 – decreased by 1.30%, to $ 70.40 a barrel, according to data viewed by the specialized energy platform.
And crude oil prices ended their dealings, yesterday, Tuesday, March 14, with a decrease of more than 4.5%, recording the lowest level in 3 months, with the increase in fears of a global economic recession.
Oil price analysis
“The financial sector in Europe is going through a lot of turmoil today,” said Naeem Aslam, chief investment officer at Zai Capital Markets.
Crude oil prices rose earlier, with figures showing that Chinese economic activity rebounded in the first two months of 2023 after the end of strict coronavirus containment measures.
The monthly report from the International Energy Agency provided support by marking an expected boost to oil demand from China a day after OPEC released its forecast for Chinese demand for 2023.
Earlier, analyst at Fujitomi Securities Co Ltd, Toshitaka Tazawa said, “Crude oil prices have rebounded on their own after the recent sharp losses,” adding that some investors took advantage of the slide to hunt for deals.
He added, “OPEC’s hike in Chinese oil demand forecasts also provided support, although investors remain concerned about a cascading financial crisis after the recent collapse of US banks.”
He indicated that he was watching whether WTI could remain above $70 a barrel, Reuters reported.
demand for oil
The Organization of the Petroleum Exporting Countries (OPEC) raised its forecast for Chinese oil demand growth in 2023 due to the easing of coronavirus restrictions in the country, although it left overall global demand flat, citing potential downside risks to global growth.
Data showed, today, Wednesday, that Chinese refineries processed 3.3% more crude in the first two months of 2023, compared to the same period in the previous year, driven by the fuel export policy and independent refineries processing more in response to improving transportation fuel margins after Beijing eased Corona restrictions.
The demand recovery in China is bullish relative to crude oil prices, said Stefano Grasso, Senior Portfolio Manager at Vantage 8.
He added, “The consensus is that the balance of oil supply and demand will shrink in the second half, driven by China’s recovery, unless a severe global recession occurs.”
American banking crisis
The failure of the Silicon Valley bank raised concerns about the risks to other banks from sharp increases in US federal interest rates over the past year, as well as speculation about whether the central bank could slow the pace of its monetary tightening.
Umod Shukri, senior adviser on foreign policy and energy geopolitics, said that crude oil prices will not fall by more than 5%, due to China’s economic growth and rising oil demand, and believes that prices will return to their usual course sooner or later.
Shukry said – in exclusive statements to the energy platform – that crude oil prices have been affected by the repercussions of the recent collapse of the Silicon Valley bank, pointing to the main reason behind the sharp decline in fuel demand resulting from the large-scale downsizing of technology companies, along with the reduction of their employees. of travel expenses.
He pointed out that since many emerging companies in the technology sector were seen as potential consumers of oil and gas in the future, their collapse led to a decrease in expectations related to the growth of oil demand in the future.
“There is no doubt that the global economy is going through a difficult time, but it remains to be seen to what extent this impact will be in the long term, and specifically the energy sector,” said Shoukry.
On Tuesday, US inflation data came in line with expectations, boosting bets on an interest rate hike by the Federal Reserve at its meeting next week.
US oil stocks
Meanwhile, US crude oil inventories rose by about 1.2 million barrels in the week ending March 10, in line with a Reuters poll, while fuel stocks fell, according to market sources citing American Petroleum Institute figures on Tuesday.
On the supply front, Saudi Energy Minister Prince Abdulaziz bin Salman told Energy Intelligence, in an interview on Tuesday, that the OPEC+ alliance is committed to production cuts agreed in October until the end of the year.
The International Energy Agency will publish its monthly report later on Wednesday. The US Energy Information Administration will also publish weekly inventory data on Wednesday evening.
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