Brent Crude Price Slumps to 9-Week Low
The crude oil market kick starts a fresh but massive prices decline following instability in the financial services sector in the United States, reducing positive sentiment earlier seen as the global economy struggles to pick up.
Market data indicates that Brent crude futures fell more than 2% to below $79 per barrel on Tuesday, approaching levels last seen on January 6 and following a 2.4% loss in the previous session.
In their separate comments, market analysts attribute the slowdown to the collapse of Silicon Valley Bank raised concerns about a broader financial and economic crisis, triggering a selloff in risk assets.
Analysts said investors also geared up for key US inflation data, which will be among the last major economic reports that the Federal Reserve will consider before next week’s policy meeting.
Bank crashes in the United States may halt further interest rate hikes, according to some market observers following the negative impacts on SVB financials among others.
Meanwhile, hopes for a recovery in Chinese demand and a weaker dollar kept a floor under prices. Investors expect China’s oil imports to hit a record high in 2023 amid growing demand for transportation fuel and as new refineries come online.
Traders now look ahead to OPEC’s monthly market report on Tuesday, and a similar report from the IEA on Wednesday for a snapshot of the outlook for supply and demand.
At the same time, West Texas Instruments (WTI) crude futures fell 2% to about $73 per barrel on Tuesday, closing in on the lowest level since December 12 and extending a 2.5% loss in the previous session.
Energy – oil under pressure
The oil market was unable to escape the broader risk-off move as markets grappled with the spillover from the SVB collapse. ICE Brent traded briefly below US$80 a barrel yesterday and to its lowest level since early January.
However, the market recouped some of these losses and managed to settle back above US$80/bbl. The increased volatility, according to ING Economics analysts have seen recently may linger for a while longer with US CPI data out later today.
This data point should give some clarity on what the Fed may do next week at their FOMC meeting, although there will still be plenty of uncertainty over Fed policy given recent developments.
Oil group (OPEC) will release its latest monthly oil market report later today, in which it will share its latest supply and demand estimates for the remainder of the year.
In last month’s report, OPEC forecasted that 2023 global oil demand would grow by 2.32MMbbls/d year on year to average 101.87MMbbls/d, while non-OPEC supply was forecast to grow by 1.44MMbbls/d YoY to 67.01MMbbls/d, which leaves the call on OPEC production at 29.42MMbbls/d in 2023.
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