Oil prices slipped more than $1 on Tuesday, extending the last day’s slide, as the fall of Silicon Valley Bank shook equity markets and sparked fear about a new financial crisis.
At 03:45 GMT, Brent crude futures were down 87 cents, or 1.1%, at $79.90 per barrel. U.S. West Texas Intermediate crude futures (WTI) slipped 85 cents, or 1.1%, to $73.93 per barrel. Brent fell to its lowest level since early January, while WTI fell to its lowest level since December.
The abrupt closure of SVB Financial (SIVB.O) raised concerns about the risks to other banks posed by the Federal Reserve of the United States’ sharp interest rate hikes over the last year. It also fueled speculation about whether the Fed would slow the pace of monetary tightening.
After fears of an outbreak from the collapse of Silicon Valley Bank led to a sell-off in U.S. assets at the end of the previous week, U.S. authorities initiated emergency measures on Sunday to beef up confidence in the banking system, and state regulators shut down New York-based Signature Bank (SBNY.O) on Sunday.
Aside from the Silicon Valley Bank shockwaves, oil prices were also pressurized because of the signs of a weaker-than-expected economic recovery in China, despite the lifting of its strict COVID-19 curbs, said an analyst at CMC Markets, Leon Li.
“The market had previously expected a strong recovery of the Chinese economy, but the latest February inflation rate was only 1% year-on-year, reflecting the current deflationary state of the Chinese economy and weak demand,” he added.
China’s statistics bureau disclosed data last week revealing consumer inflation in the world’s second-largest economy slowed to the lowest rate in a year in February as shoppers remained careful even after pandemic restrictions were lifted in late 2022.
On Tuesday, the American Petroleum Institute is anticipated to publish industry data on US oil inventories.
Reuters polled six analysts, who predicted that crude stockpiles rose by almost 600,000 barrels during the week ending March 10.
