Oil in London fell below $80 a barrel for the first time since early February as the collapse of Silicon Valley Bank added further turbulence to energy markets.
The failure of the bank — the worst since the 2008 financial crisis — is reverberating across markets, hitting equities around the world and driving down the dollar. US authorities are rushing to strengthen confidence in the banking system and prevent contagion, while Goldman Sachs Group scrapped its call for a Federal Reserve interest-rate hike next week due to the turmoil.
“The risk of a US recession has strengthened on the back of these developments,” said Ole Hansen, head of commodities strategy at Saxo Bank.
Oil been whipsawed this year by concerns over America’s tightening monetary policy and optimism around China’s economic recovery. Many market watchers are still bullish on the longer-term outlook, with Saudi Aramco forecasting consumption will probably hit a record of 102 million barrels a day by the end of 2023.
Traders have been paying big premiums for bearish put options as the demise of SVB led some to hedge against the risk of an oil-price decline. The premium of puts over bullish calls rose to the highest since November last week.
- Brent for May delivery was 4.6% lower at $78.97 a barrel at 12:16 p.m. in London
WTI for April fell 5.1% to $72.77
Monthly reports from the Organization of the Petroleum Exporting Countries and the International Energy Agency this week will provide more clues on the outlook for oil supply and demand.