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Oil prices rebounded and rose more than 1% on Monday after plunging to 15-month lows amid turmoil in the banking sector.
THE Brent The contract with May delivery last rose 73 cents, or 1%%, to $73.70 a barrel, after hitting $71.64 a barrel at 11:00 a.m. London time.
First April WTI Nymex gained 73 cents, or 1.09%, to $67.47 a barrel.
Oil prices have come under pressure from a crisis in Western banking, which has seen the fall of tech startup-focused Silicon Valley Bank and the takeover of beleaguered Credit Suisse by its Swiss rival UBS within two weeks. Two sources within the influential OPEC+ alliance told CNBC late last week that banking uncertainty was fueling fears of another financial meltdown on the heights of the 2008 crisis.
OPEC+ delegates could only comment on condition of anonymity, as they are not authorized to discuss the topic publicly.
One of the sources noted that the decline was likely temporary and not supported by the supply and demand fundamentals surrounding the physical product, but stressed the need to monitor the potential effect on interest rate decisions. central bank interest and inflation. The European Central Bank continued with a further rate hike of 50 basis points on March 16, while the US Federal Reserve is due to make its own rate decision this week.
Over the past year, OPEC+ has championed a stable oil price landscape to encourage long-term investment in spare capacity and avoid supply shortages. A ministerial OPEC+ technical committee is then due to adjourn on April 3.
In a note dated March 15, UBS analysts said broader financial market turmoil was unlikely to affect crude oil production rates, but noted that “during periods of high volatility, investors tend to pull out of risky assets like oil and invest in safer places.” of the market.”
He added that the options market is now intensifying the drop in oil prices through delta hedging plays.
Citing “banking stress, recession fears and an exodus of investor flows,” Goldman Sachs analysts cut their oil price outlook on March 18, now expecting Brent prices to hit 94 dollars per barrel over the next 12 months and $97 per barrel over the next 12 months. half of 2024 – compared to previous projections at $100 a barrel for both periods.
“Our adjustment also reflects somewhat weaker fundamentals, namely higher-than-expected short-term inventory, moderately weaker demand and slightly higher non-OPEC supply,” Goldman Sachs said.
Questions remain over the potential increase in demand for a reopening from China – the world’s biggest importer of crude oil, whose purchases were held back for much of last year by Covid-19 restrictions .
The Paris-based watchdog, the International Energy Agency, nevertheless said in the March issue of its Monthly Oil Market Report that he expects global oil demand growth to “accelerate sharply during 2023”, seeing “the rebound in air traffic and the release of pent-up Chinese demand dominate the recovery”.
The supply picture remained clouded by Russia, whose oil flows were stifled by Western sanctions implemented against its seaborne crude and oil products in December and February, respectively. Moscow announced a unilateral cut of 500,000 barrels per day in its crude production in March, announced by Deputy Prime Minister Alexander Novak on February 10.
It remains to be seen whether Russia’s declines will be long-term or are the product of technical difficulties in maintaining production rates on the ground after the winter cold, an OPEC+ delegate told CNBC last week. According to the Saudi Press AgencySaudi Energy Minister Prince Abdulaziz bin Salman received Novak in Riyadh on March 16, with the two countries reaffirming their commitment to the OPEC+ policy of withdrawing a combined production of 2 million barrels per day from markets until the end of 2023, agreed in October.