Crude oil trades to near a 15-month low as bank fears persist
Head of Investment Research
Crude oil prices traded just above a 15-month low on Monday morning as market participants concern over more banking defaults around the world, following the worst banking crisis since the 2008 financial crisis.
Despite the increasing geopolitical tensions in Eastern Europe, energy investors are also weighing the risk of recession and the impact of interest rates on the global economic and industrial activity that will potentially hit the petroleum demand outlook.
Risk aversion sent Brent and WTI crude oil prices as low as $70/b and $64,50/b respectively on March 20, for the first time since the end of December 2021, before rebounding to the current levels of $75/b and $70/b as U.S. and European regulators rolled out a slew of measures to calm financial markets.
Both Brent and WTI crude oil prices have lost more than 12% since early March on the back of the banking crisis, given the interconnectedness of the financial sector with commodities, especially the energy sector.
Brent crude, Daily chart
Appetite for risk and growth-led assets turned lower last week following the selloff in the global banking sector driven by the worries over the heavyweights Deutsche Bank and UBS Group, Germany’s, and Switzerland’s largest lenders, with investors moving to the safety of the gold, silver, Japanese yen, and greenback.
Banking stocks have been battered in March following the sudden failures of two regional U.S. lenders, the Silicon Valley Bank, and the Signature Bank, and the emergency sale of embattled Swiss bank Credit Suisse to rival UBS.
Energy investors have also been closely monitoring the recent escalation in Eastern Europe after Russian President Vladimir Putin’s statement that he would station tactical nuclear weapons in Belarus.
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