Reuters, March 20 – NEW YORK Oil prices rose more than 1% on Monday after falling to their lowest levels in 15 months due to market concerns that risks in the global banking sector could spark a recession, reducing fuel demand.
Brent crude futures for May rose 82 cents, or 1.1%, to $73.79 per barrel in volatile trade. On the eve of the contract’s expiration, April West Texas Intermediate crude futures gained 90 cents, or 1.4%, to $67.64. May futures rose 89 cents, or 1.3%, to $67.82 a barrel, the most actively traded contract.
Despite a historic deal in which UBS, Switzerland’s largest bank, agreed to buy Credit Suisse (CSGN.S) to save the country’s second-largest bank, oil fell early.
Following the announcement of the agreement, the Federal Reserve of the United States, the European Central Bank, and other major central banks pledged to increase market liquidity and support other banks.
“There is a lot of fear-based movement” in oil prices, according to Price Futures Group analyst Phil Flynn. “We’re not making any progress on supply and demand fundamentals; we’re only making progress on banking concerns.”
In this photo taken by Kyodo, an aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan, on November 12, 2021. The photograph was taken on November 12, 2021. Credit must be given to Kyodo/via REUTERS.
The S&P 500 and Dow Jones gained, helping lift oil prices off session lows on bets that the Fed will likely pause rate hikes on Wednesday to avoid a snowball effect in the banking sector. Traders and economists are divided on whether the Fed will raise its key interest rate.
Some executives are urging the Fed to pause its tightening of monetary policy while remaining prepared to raise interest rates later.
“Volatility is likely to persist this week, with broader financial market concerns likely to remain at the forefront,” ING Bank analysts wrote in a note, adding that the upcoming Fed decision adds to market uncertainty.
Meanwhile, two European Union officials and one official from a coalition member told Reuters on Monday that the Group of Seven nations are unlikely to revise a $60-per-barrel price cap on Russian oil this week.
The G7 was supposed to review the price cap put in place in December in mid-March, but officials said the European Commission told EU ambassadors over the weekend that there is no appetite among the G7 for an immediate review.
A ministerial committee of OPEC and producer allies, including Russia, known as OPEC+, will meet on April 3. In October, the group agreed to reduce oil production targets by 2 million barrels per day until the end of 2023.
