Oil Declines 3% over Demand Concerns
Crude oil prices declined amidst demand concerns following news that UBS will buy struggling Credit Suisse fails to assuage worries over the ongoing banking crisis in the United States.
Brent crude futures were down more than 3% to $70 a barrel on Monday, holding at levels not seen since late 2021, and extending a 12% slump last week, as concerns mount that the banking turmoil could hurt the economies and cause a recession, lowering fuel demand.
West Texas Instrument (WTI) crude futures were down almost 3% to $65 a barrel on Monday, holding at levels not seen since late 2021, and extending a 13% slump last week, as concerns mount that the banking turmoil could hurt the economies and cause a recession, lowering fuel demand.
Yet, initial enthusiasm over the government-backed takeover of Credit Suisse by UBS and coordinated action by major central banks to boost dollar liquidity faded, leading to a more cautious mood.
On the other hand, signs of strong demand from top crude importer China emerged, with Unipec buying 2 million barrels of the North Sea’s Johan Sverdrup crude, the first purchase to Asia in three months, according to Bloomberg.
Traders were also cautious ahead of Fed’s monetary policy decision this week while watching closely for any potential response to the rout from OPEC+, though the group is expected to stay put for now.
Fed officials are also set to meet this week amid uncertainty about the path of interest rates. “Volatility is likely to linger this week, with broader financial market concerns likely to remain at the forefront,” says ING in a note.
A ministerial committee of OPEC and producer allies including Russia, known as OPEC+, is set to meet on April 3, with a full ministerial meeting planned for June 4. The organization had agreed in October to cut oil production targets by 2 million barrels per day until the end of 2023.
Separately, Goldman Sachs cut its forecasts for Brent crude after prices plunged on banking and recession fears. The investment bank is now expecting Brent to average $94 a barrel in the next 12 months, and $97 in the second half of 2024, down from $100 previously. #Oil Declines 3% over Demand Concerns