© Reuters.
By Barani Krishnan
Investing.com – China’s might and its COVID crisis couldn’t break Oil’s $70 support. It took a banking crisis to do that.
The U.S. crude benchmark fell 7% or more on Wednesday to below $70 a barrel for the first time since December 2021 as the banking crisis that began with the collapse of the midsize California lender Silicon Valley Bank is now threatening Europe-based Credit Suisse – one of the world’s biggest names in investment banking.
“Hell is breaking loose in oil and it has everything to do with the US banking crisis which is now going global,” said John Kilduff, partner at New York-based energy hedge fund Again Capital. “After all, there is something more powerful than Chinese demand for oil – liquidity. »
WTI, as the benchmark for US crude is known by its initials, fell to $65.70 a barrel at 1:00 p.m. ET (1700 GMT), marking a low not seen since December 2, 2021, when it hit an intraday low. of $62.43.
With its drop of more than 6% in the previous two sessions, WTI’s losses for the week now stand at more than 13%.
Trading in the UK was down $5.50, or 7.1%, at $71.95 a barrel, after an intraday low at $71.77. Like WTI, the global crude benchmark has lost 13% since the start of the week.
The path of least resistance for oil was lower, with WTI’s next stop seen below $64, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“With the daily low now below the 200-week SMA of $66.18, WTI is open at $63.40,” Dixit said, using the simple moving average for the benchmark for US crude.
Credit Suisse’s share price plunged 28% in the biggest one-day sale on record, leaving it down more than 75% in the past year as questions grew over its solvency.
The crisis at CS became more visible on Wednesday after its biggest shareholder, Saudi National Bank, responded with an emphatic “absolutely not” when asked if it was prepared to make further injections of cash into the bank. investment firm based in Zurich.
Despite the cold response, Credit Suisse has still appealed to its largest shareholder for a “public show of support”, the Financial Times reported.
The Zurich-based investment bank has also appealed to its central bank for support, the FT reported, with another headline saying: “Swiss government faces pressure from at least one major government to intervene on Credit Suisse.”
In the United States, the Treasury Department announced that it was reviewing US banks’ exposure to Credit Suisse.
Wednesday’s oil sale came despite a drop in U.S. fuel inventories reported by the Energy Information Administration, or EIA.
fell 2.061 million barrels last week, against the forecast decline of 1.820 million and against the previous week’s deficit of 1.134 million. Automotive fuel is the #1 fuel product in the United States.
Distillate inventories also fell after rising in the previous three weeks. Distillates are refined into diesel, diesel for trucks, buses, trains, and ships, and fuel for jet aircraft, and are among the most demanded components of the American petroleum complex.
fell 2.573M from the expected decline of 1.172M. The previous week, Distillates rose by 0.138M.
Bucking the trend, US crude inventories resumed their ascent last week after a week-long decline.
rose 1.55 million barrels in the week ended March 10, the EIA reported.
In the week prior to March 3, crude inventories fell 1.694 million barrels after 10 straight weeks of builds that added some 60 million to inventories amid seasonal maintenance and other refinery disruptions Americans which have led to a reduction in the processing of oil. An abnormally warm winter had also created less need for fuel oil.