Oil prices extended losses today, trading near 15-month lows, after the European Central Bank raised interest rates and as fears of a global banking crisis weighed on the demand outlook.
Brent crude futures were down $1.15, or 1.6%, at $72.54 a barrel this afternoon. West Texas Intermediate crude futures (WTI) fell $1.27, or 1.9%, to $66.34.
Yesterday, the third day of declines in a row, US crude fell below $70 a barrel for the first time since December 20, 2021.
Brent has lost over 12.5% since Friday's close, while US crude is down about 13.5%.
As the banking crisis which started last week in the US spread to Europe and Credit Suisse yesterday, the need to reduce across market exposure accelerated, Saxo Bank analyst Ole Hansen said.
Credit Suisse said today it would borrow up to $54 billion from the Swiss central bank to shore up its liquidity and investor confidence after a slump in its shares intensified fears about a global financial crisis.
The news initially helped propel oil prices into positive territory, but a decision by the ECB to raise interest rates weighed on sentiment, plunging prices into losses.
The bank raised interest rates by 50 basis points today, as promised, ignoring financial market chaos and calls by investors to dial back policy tightening at least until sentiment stabilises.
OPEC+ delegates told Reuters the producer group considers this week's slide in oil prices to be driven by financial fears, not any imbalance between demand and supply, and expects the market to stabilise.
OPEC raised its 2023 China demand forecast this week and a monthly report from the International Energy Agency (IEA) this week flagged an expected boost to oil demand from resumed air travel and China's economic reopening after abandoning its zero-Covid policy.
But oversupply concerns remain.
The IEA report said commercial oil stocks in developed OECD countries had hit an 18-month high while Russian oil output in February stayed near levels registered before the war in Ukraine, despite sanctions on its seaborne exports.
A fall in US fuel stocks last week helped limit losses. While Energy Information Administration data showed that crude inventories rose by 1.6 million barrels, gasoline and distillates stocks fell by a combined 4.6 million barrels.