Oil Prices Rise 1% Amid Banking Crisis Worries

On Friday, oil prices rose by around 1% following a meeting between Saudi Arabia and Russia, which helped calm markets amid strong demand expectations in China.

This comes after a banking crisis caused intense selling in global financial and oil markets earlier this week.

At 05:21 GMT, Brent crude futures rose by 77 cents to $75.47 per barrel. Yesterday, Thursday, it ended a three-day losing streak and recorded a 1.4% increase at the close.

The average American West Texas Intermediate crude oil increased by 71 cents to $69.06 per barrel, after it rose by 1.1% at the end of yesterday.

The prices of crude oil contracts reached their lowest levels in over a year this week and are expected to record their biggest weekly decline since December by around 10%. The global oil market and other international assets have also declined this week, while the collapse of Silicon Valley Bank and SIGNSPREAD has led the US and Swiss governments to seek liquidity support for banks.

Analysts at J.P. Morgan stated in a note that they are reassessing demand for oil, but do not expect any significant changes in the fundamentals and are inclined to look past financial sector volatility, maintaining their price expectations without alteration at present. They are waiting for updates on potential policy measures in the upcoming weeks, alluding to a meeting. For the OPEC group and Washington’s potential move to replenish strategic reserves.

The OPEC Advisory Committee, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, will convene on April 3rd.

Analysts at the National Australia Bank said in a memo that further price declines could prompt OPEC to cut supply in order to prevent an anticipated increase in inventories in the second quarter of the year.

The American benchmark crude, West Texas Intermediate, has fallen below $70 per barrel for the first time since December 2021. This could make the prices attractive enough for the US government to start refilling its strategic petroleum reserves, which have reached record low levels.

Analysts’ predictions of a rebound in demand in China were supported by the increase in oil prices at the end of the week, while US crude oil exports to China reached their highest levels since nearly two and a half years in March.

According to analyst Tina Ting from CMC Markets, an increase in demand in China would be advantageous for oil prices if upcoming data shows a significant recovery for the country’s economy.

According to analysts at E.Z, traffic flow on roads and air travel in China are rapidly increasing, while there are signs of improvement in advanced economies.

However, the continued risk of the banking crisis spreading is still causing concern among investors, which in turn reduces their interest in assets such as commodities for fear that any new disruption could lead to a global recession and a decline in demand for oil.

Ting stated that recent banking crises may continue to affect demand prospects.