Western Texas Intermediate (WTI), the US crude oil benchmark, dropped more than 2% on risk-off impulse, with a bank crisis in the United States (US) raising fears for a possible contagion. Nevertheless, a recovery in Chinese demand put a lid on WTI’s fall. At the time of writing, WTI is trading at $74.54 after hitting a high of $77.42.
US assets dropped in value last week due to worries about the impact of Silicon Valley Bank’s collapse, and regulators shut down another bank in New York on Sunday.
On Monday, U.S. stocks were mostly up but volatile as investors wondered if the Fed would stop raising interest rates in March. The government took urgent steps on Sunday to boost trust in the banks. [.N]
The sudden closure of SVB Financial raised questions about how other banks were affected by the Fed’s fast rate increases in the past year. It also made investors think the central bank might slow down its monetary policy.
Oil prices fluctuated on Monday as investors assessed how the news would affect the market. WTI price usually increases with a weaker US Dollar because oil becomes more affordable for people who use other currencies.
High US oil stockpiles have also pressured oil prices, which indicates weak demand.
Oil’s decline came after a positive day on Friday when US job data was better than expected. The number of jobs added in February was 311,000, much higher than the predicted 205,000 by market participants.
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