Singapore, March 20 (BNA): Oil prices fell today, Monday, for the second session, amid fears that risks in the global banking sector may cause 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. Book this week.
Brent crude futures settled in May fell 68 cents, or 0.9%, to $72.29 a barrel at 0500 GMT after losing nearly 12% last week, in its biggest weekly drop since December, Reuters reported.
US West Texas Intermediate crude for April delivery was at $66.16 a barrel, down 58 cents, or 0.9%, after falling 13% last week, its biggest weekly drop since last April. The April contract expires on Tuesday, and the more active May futures contract fell 0.8%, at $66.40.
The drop in oil prices comes despite a historic deal that will see UBS, Switzerland’s largest bank, buy the country’s No. 2 lender Credit Suisse in a bid to prevent a banking crisis from spreading.
After the announcement, the US Federal Reserve, the European Central Bank and other major central banks pledged to boost 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 Mr. Baden-Moore, Head of Commodities Research at National Australia Bank.
“The upcoming OPEC meeting is another potential catalyst for market expectations. Further downside risks to prices raise the possibility of OPEC cutting production further to support prices,” Moore added, referring to the Organization of the Petroleum Exporting Countries (OPEC).
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 executives 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 could depress the greenback, making dollar-denominated commodities such as crude oil more accessible to holders of other currencies.
“The Fed will be the most important institution to watch this week,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
We’ll see how they balance financial stability risks with containing inflation.
A ministerial committee of OPEC and producer allies including Russia, known as OPEC+, is scheduled to meet on April 3, with a full ministerial meeting planned for June 4. The organization agreed in October to cut oil production targets by two million barrels per day. Until the end of 2023.
Separately, Goldman Sachs cut its outlook for Brent crude after prices fell on bank and recession concerns. 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.
Rial