Oil prices rose more than two per cent on Tuesday, extending a retreat from a 15-month low hit the previous day, as the rescue of Credit Suisse allayed concerns of a banking crisis that would hurt economic growth and cut fuel demand.
Fears about the financial system that roiled markets last week have been allayed by steps to stabilize the banking sector, including a UBS acquisition of Credit Suisse and commitments to increase liquidity from major central banks.
“Fears of a banking crisis and a recession have eased, brightening the oil demand outlook at least for now,” said Fiona Cincotta, Senior Financial Markets Analyst at City Index.
Although US West Texas Intermediate (WTI) closed up $1.69, or 2.5 percent, at $69.33 per barrel, Brent crude ended up $1.53, or 2.1 percent, higher at $75.32 per barrel.
After hitting their lowest levels since December 2021 on Monday, both benchmarks ended up somewhat higher. WTI even dropped below $65 at one point. They lost more than 10% of their value last week as the banking crisis grew worse.
“A ‘risk back on’ sentiment seems to be coming back to crude, as the latest selloff may very well have been exaggerated liquidation,” said Dennis Kissler, senior vice president of trading at BOK Financial.
US Federal Reserve began discussing monetary policy
On Tuesday, the US Federal Reserve began discussing monetary policy. Markets now anticipate a 25 basis point increase in rates, down from earlier forecasts of a 50 bps rise. Top central bank observers have suggested that the Fed might postpone further rate increases or put off the release of new economic forecasts.
The Wall Street indices likewise ended the day significantly higher on Tuesday as market players turned their attention to the Fed and worry about banking sector liquidity subsided.
The American Petroleum Institute said that US crude oil stockpiles increased by around 3.3 million barrels last week, according to market sources. When compared to Reuters’ predictions of a draw of 1.6 million barrels, this occurred. On Wednesday, the US Energy Information Agency is expected to release figures.
There will be a meeting of ministers from OPEC+ on 3rd April
On April 3, there will be a meeting of ministers from OPEC+, which consists of OPEC members as well as Russia and other partners. OPEC+ sources told Reuters that rather than supply and demand, the price decline is caused by financial uncertainties.
The manager of a hedge fund Pierre Andurand concurred that the most recent price decline was speculative and not grounded in reality. By year’s end, he projected, oil will cost $140 a barrel.
As the market becomes even more constrained due to increased Chinese demand, Torbjorn Tornqvist, the CEO of energy trader Gunvor, predicted that oil prices will rise as the year came to a close.
According to the US Commodities Futures Trading Commission (CFTC), money managers reduced their net long positions in US oil futures and options during the week ending March 14.