Crude oil prices fell more than 2.5%, during trading today, Monday, for the second consecutive session, amid fears of a global economic recession.
And raised risks in the global banking sector fears of a recession that could lead to a decline in demand for fuel and ahead of a possible hike in interest rates by the US Federal Reserve this week.
Crude oil prices today
By 07:39 a.m. GMT (10:39 a.m. Mecca time), the prices of benchmark Brent crude futures – for May 2023 delivery – fell by about 2.66%, to reach $71.03 a barrel.
The price of US West Texas crude futures – delivery in April 2023 – fell by 2.80%, to $64.87 a barrel, according to data viewed by the specialized energy platform.
On Friday, March 17, crude oil prices ended lower, recording their largest weekly decline since December.
During the past week, both Brent and WTI crude fell by 11.8% and 13%, respectively.
Oil price analysis
The decline in crude oil prices comes despite a landmark deal that will see UBS, Switzerland’s largest bank, buy the country’s No. 2 lender Credit Suisse in a bid to prevent the banking crisis from spreading.
After the announcement, the US Federal Reserve, European Central Bank and other major central banks pledged to enhance market liquidity and support other banks.
“The focus of the market is on the current volatility in the banking sector and the possibility of the Fed raising interest rates,” said Baden Moore, head of commodities research at National Australia Bank.
“The upcoming OPEC meeting is another potential catalyst for market expectations, as more downside risks to prices increase the possibility of OPEC+ cutting production further to support crude oil prices,” Moore added, referring to the Organization of the Petroleum Exporting Countries (OPEC).
The OPEC+ ministerial committee is scheduled to meet on April 3, with a full ministerial meeting planned for June 4 to discuss market conditions.
The alliance agreed in October to cut oil production targets by two million barrels per day until the end of 2023.
interest rates
The US Federal Reserve is expected to raise interest rates by 25 basis points on March 22, despite the recent banking sector turmoil, according to most economists polled by Reuters.
However; Some CEOs are calling on the central bank to pause its monetary tightening for now, but they should be ready to resume rate hikes later.
A slowdown in raising interest rates may lead to a decline in the US currency; This makes dollar-denominated commodities such as crude oil more accessible to holders of other currencies.
“The Federal Reserve will be the most important institution to watch this week,” said analyst at the Commonwealth Bank of Australia, Vivek Dar.
He added, “We will see how they balance the risks of financial stability while containing inflation,” according to Reuters.
Separately, Goldman Sachs cut its outlook for Brent crude after crude oil prices fell due to bank and recession fears.
The investment bank now expects Brent crude to average $94 a barrel in the next 12 months, and $97 in the second half of 2024, down from $100 previously.
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