By Barani Krishnan
Investing.com — The crisis in U.S. banking isn’t abating and it’s dragging oil further and further down with it.
With trading for Friday about three hours away from settlement, crude prices were down for a fourth time in five days, accumulating a net weekly loss of nearly 15%. The last time oil markets fell that much was in April 2020, at the height of the demand destruction caused by the coronavirus pandemic.
This time around, the crash in oil wasn’t triggered by supply-demand but a crisis of confidence in banks, which basically provide the liquidity for trading in not just crude but all commodities.
“Energy traders are not sure what could be the catalyst to send oil prices higher given all the doom and gloom happening with short-term crude demand outlooks,” said Ed Moya, analyst at online trading platform OANDA. “The Fed’s forecasts will closely be watched as that will signal if we are at a greater risk of a policy mistake. For now oil will remain heavy as traders try to figure out what type of recession policymakers will trigger in the U.S.”
New York-traded , or WTI, was down $3, or 4.4%, to $65.35 barrel by 11:30 ET (15:30 GMT). For the week, the U.S. crude benchmark was down more than 15%. The last time it lost more than that in a week was during the week to April 10, when it fell almost 20%.
London-traded was down $3.20, or 4.3%, to $71.50. The global crude benchmark was down 13% on the week.
“Crude prices remain heavy as banking turmoil won’t be going away anytime soon and over fears that the Fed’s rate hiking cycle is starting to take down the economy,” added Moya. “It seems that the oil bump that we got earlier in the month from China’s reopening was premature. Clearly China’s recovery still needs more support.”
The U.S. banking crisis began after two mid-sized lenders — Silicon Valley Bank (SVB) and Signature Bank — were rescued by the Federal Deposit Insurance Corp last week as depositors yanked billions of dollars from them after fearing for their solvency. SVB eventually filed for bankruptcy protection over the past 24 hours. A third bank, First Republic, is also in trouble despite receiving a $30 billion cash infusion from a consortium of banks.
Elsewhere, the banking crisis has spread to Europe, with Credit Suisse (NYSE:), one of the preeminent names in global investment banking, having to seek help from Switzerland’s central bank.
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