Oil prices fell sharply on Monday with Brent crude crashing to $70 amid fears of the impact of the US banking crisis on the global economy.
Crude oil futures were down in mid-morning Asian trade on March 20 due to heavy losses incurred by Brent markers after last week’s Credit Suisse collapse raised fears of broader weakness in the global economy.
At the time of filing, Brent crude is down $2.26, or 3.10 percent at $70.71 a barrel, while the US West Texas Intermediate (WTI) crude lost $2.14, or 3.21 percent, to sit at $64.6 per barrel after markets resumed trade in red on Monday.
Before today’s sharp decline, prominent energy analysts were skeptical about how far the decline in oil prices might go. Overall, sentiment in the global financial markets remained hazy, with bearish banking sector forecasts indicating an unpleasant picture of the global economy.
Switzerland’s Credit Suisse on Sunday announced that it has merged with UBS. Subsequently, central banks in the United States and Europe took coordinated action to increase dollar liquidity and to assuage market concerns about the financial crisis triggered by the failure of the US-based Silicon Valley Bank and Signature Bank, including the $30 billion rescue of the San Francisco- based First Republic Bank.
Despite these developments, crude oil futures were trading lower. According to reports, the market is anticipating the US Federal Reserve to become more aggressive through its monetary policies. Interest rates are expected to rise higher, international market experts commented today.
Meanwhile, Russia surpassed Saudi Arabia as China’s top oil supplier in the first two months of 2023, as buyers snapped up sanctioned Russian oil at steep discounts.
Following Moscow’s invasion of Ukraine, western sanctions and a price cap on Russian crude have limited the buyer pool for Russian supply, giving it no other choice but to trade at deep discounts to international benchmarks. Against market expectations, this has worked out exceptionally well and the global banking crisis isn’t expected to impact it in any way.