Oil prices have fallen about 15% since Friday, amid unrest in the financial system after the collapse of three US banks.
Crude prices on Wednesday lost more than $5 a barrel to a more than a year low as concerns about Credit Suisse rocked global markets and offset hopes of a recovery in oil demand. in China.
The barrel of West Texas Intermediate (WTI) oil, a reference for the United States, closed the session at 67.61 dollars per barrel, a fall of 5.2% compared to the previous day’s close. Earlier in the session, it hit a low of $65.70, a level not seen since December 2021.
North Sea Brent tumbled 4.9% to $73.69 a barrel, after falling as low as $65.65 during the session, a bottom in more than 15 months.
For its part, the Mexican export mix fell 5.73% to 58.11 dollars per barrel, leading the losses among the three benchmarks.
Since Friday, the WTI has declined 11.83%, the Brent loses 11%, while the Mexican mix falls 13%, due to the uncertainty that has been generated that there will be a recession after the collapse of the Silicon Valley Bank (SVB) and two other US banks.
“Contagion fears are clearly gaining ground,” Tamas Varga of the PVM brokerage told Reuters. “As a result, the dollar is stronger and stocks are weakening: bad omens for oil.”
Ana Azuara, a Raw Materials analyst at Banco Base, explained that if the WTI is sustained at levels of 65 dollars per barrel, its next technical support “would be at 62 dollars per barrel and from there up to 57 dollars.” .
The average price of the Mexican export mix for this year set by the federal government within the 2023 Economic Package is 68.7 dollars per barrel. That means that this Wednesday’s price is 15.41% below government expectations.
After a pause on Tuesday, the day oil prices recovered slightly, fears about the situation in the banking sector returned to international markets.
This Wednesday, the bad winds came from the Swiss bank Credit Suisse, which fell hard on the stock market as it was the target of doubts about its financial soundness. “It is a bank that counts and the risk of contagion (to the rest of the sector) will not dissipate anytime soon,” Oanda’s Edward Moya said in a note.
Crude had risen earlier after data showing China’s economic activity picked up in the first two months of 2023 as consumption and infrastructure investment fueled the recovery after the end of Covid-19 containment measures, trend that was reversed after the fall in Credit Suisse shares.
“Commodities are often a signal that heralds recession concerns,” said Matt Smith of Kpler. “We are increasingly fearful about the economy and oil is falling.”
Investors see “direct parallels with previous recessions triggered by the banking sector, particularly the 2008 crisis when oil tanked,” said Stephen Innes of SPI AM.
During periods of strong instability, “investors tend to withdraw from risky assets such as oil and invest in safer sectors, favoring safe-haven securities,” said Giovanni Staunovo, an analyst at Swiss investment bank UBS.
For Phil Flynn, of Price Futures Group, “crude oil takes the brunt because many banks are exposed to oil, with financing (to that industry) and also because many have trading activity (purchase and sale)” of oil in the markets.
This Wednesday, in addition, the weekly report of the US Energy Information Agency (EIA) reported an increase of 1.6 million barrels in commercial crude oil reserves in the United States. This is the tenth rise in 11 weeks, news that is putting downward pressure on prices.
Oil companies fall sharply
Given the drop in crude oil prices, oil companies have had heavy losses on the stock market during the week.
Of the five largest in the world, the British Shell is the one that leads the losses, with a drop in its titles of 12.08% during the week, to 22.59 pounds each.
It is followed by the French TotalEnergies, which fell 8.91%, as well as the American Exxon Mobil and Chevron, which fell 6.88 and 4.18%, respectively.
For its part, the most valuable oil company in the world on the Stock Market, the Saudi Aramco has lost 3.81% since Friday.
The shares of oil companies usually move in line with oil prices, because a lower price of the raw material is a sign of lower sales for these companies, analysts explained. (With information from Reuters)
