Oil prices extend losses

Oil prices extended losses, trading near monthly lows in more than a year after the European Central Bank raised interest rates and tensions over the global banking crisis weighed on the outlook for demand.

Brent crude oil futures were down $1.15, or 1.6%, at $72.54 a barrel. West Texas Intermediate crude futures were down $1.27, or 1.92%, at $66.34.

In a third day of decline, US crude fell below $70 a barrel for the first time since December 2021. Brent lost more than 12.54% after Friday’s close, while US crude was down around 13.53%.

As the banking crisis that began in the US last week spread to Europe and Credit Suisse on Wednesday, the need to halve market exposure hastened.

Credit Suisse is planning to take on a loan of up to $54 billion from the Swiss bank in order to increase liquidity and bolster investor trust in the face of drastic share prices, which have stirred up talk of a potential worldwide economic downturn.

The news initially helped push oil prices into higher territory, but the ECB’s decision to raise interest rates weighed on sentiment and sent prices into negative territory.

The bank increased interest rates by 50 basis points as promised, ignoring financial market volatility and investors’ demands to hold off on policy tightening until the situation stabilises.

The impact of financial losses on oil prices

The producer group believes that this week’s drop in oil prices is due to financial losses and not any imbalance between demand and supply.

OPEC raised its 2023 Chinese demand forecast this week. The International Energy Agency’s weekly monthly statistics indicated an expected increase in oil demand from renewed air travel and China’s economy reopening after abandoning its zero-covid-19 policy.

The IEA report said commercial oil inventories in developed OECD countries hit an 18-month high, while Russian oil production in February remained close to levels registered before the war in Ukraine.

Falling fuel inventories in the United States helped limit losses. While crude oil inventories rose by 1.7 million barrels, gasoline and distillates inventories fell by 4.7 million barrels, Energy Information Administration data showed.