After the bankruptcy of SVB, the price of crude oil was more than uncertain this Wednesday, March 15, 2023. Crude oil prices widened their losses by more than 5%, as Credit Suisse’s difficulties after the collapse of Silicon Valley Bank (SVB) reignited fears of an international recession. Brent North Sea crude for May delivery was down 5.32 percent to $73.33, while its U.S. counterpart, West Texas Intermediate (WTI) for April delivery, was down 5.57 percent to $67.39.
European banks in trouble after SVB bankruptcy
Concerns about the situation of banks are crystallizing around the difficulties of Credit Suisse, while its largest shareholder, Saudi National Bank, has ruled out any increase in the capital of the bank in difficulty. In the wake of Credit Suisse, other European banks such as BNP Paribas, Société Générale and Commerzbank fell on the stock market.
Analysts at Energi Danmark say that the repercussions of SVB’s bankruptcy continue to affect the oil and financial markets. “With the market fearing a recession and lower demand, prices are falling,” they continue.
SVB bankruptcy, the beginning of a European crisis?
Chris Beauchamp, an analyst at IG, says that “what started as a regional banking crisis in the U.S. has suddenly turned into a European crisis.” Energy investors are drawing direct parallels to past banking-induced recessions, particularly the 2008 financial crisis, which has similar resonances to the current financial turmoil, a period when oil collapsed, argues SPI AM analyst Stephen Innes.
U.S. crude oil prices continue to rise after
U.S. commercial crude oil inventories rose by another 1.6 million barrels in the week ended March 10, according to figures released Wednesday by the U.S. Energy Information Agency (EIA). This is their tenth progression in eleven weeks.
A glimmer of hope for Chinese demand
Oil had begun the European session up, after “a flurry of positive macroeconomic data” in China, the world’s largest importer of crude, said Stephen Brennock, analyst at PVM Energy. The country’s retail sales, the main indicator of household consumption, recorded its first rebound since September 2020, which is seen as a sign of economic recovery.
Chinese refineries increase production
In addition, DNB analysts pointed to an increase in Chinese refinery production in January and February, also indicating a recovery in fuel demand. This increase in refinery production is in line with China’s economic recovery, which is recovering from the impact of the Covid-19 pandemic after anti-Covid restrictions were lifted.
Last Tuesday, the Organization of the Petroleum Exporting Countries (Opec) revised China’s oil demand upwards in its monthly report. This upward revision is another sign that the Chinese economic recovery is well underway, which is a positive indicator for the global oil market. With Chinese demand for oil on the rise, this could also help stabilize global oil prices.
