Oil prices fell $4 on Monday along with equities as the collapse of Silicon Valley Bank raised fears of a fresh financial crisis, but a recovery in Chinese demand provided support.
Brent crude futures were down $3.96, or 4.8 per cent, to $78.82 per barrel by 1220 GMT. West Texas Intermediate US crude futures (WTI) fell by $3.86, or 5 per cent, to $72.82 a barrel.
Brent hit its lowest levels since early January while WTI touched prices not seen since early December.
Fears of contagion from the failure of Silicon Valley Bank led to a selloff in US assets at the end of last week, while state regulators closed New York-based Signature Bank(SBNY.O) on Sunday.
Europe’s STOXX bank index (.SX7P) was down 5.7 per cent, having shed 3.8 per cent on Friday. US authorities launched emergency measures on Sunday to shore up confidence in the banking system.
Market sentiment was already fragile as worries about further monetary tightening by the Fed have been exacerbated by high crude oil inventories in the US, analysts from ANZ Bank said in a note on Monday morning.
“It’s like the battle of surging activity data in the East meets macro malaise in the West,” said Stephen Innes, managing partner of SPI Asset Management, commenting on the competing sentiment drivers in the crude market.
In recent days a weaker dollar, which makes oil cheaper for holders of other currencies, has lent some support to prices.
Oil’s fall follows positive momentum on Friday when US employment data surprised to the upside. Data for February beat expectations, with nonfarm payrolls rising by 311,000, compared with expectations of 205,000 jobs added, according to a Reuters survey.
From a medium- to long-term supply perspective, energy services firm Baker Hughes Co (BKR.O) on Friday said US energy firms last week cut the number of oil and natural gas rigs operating for a fourth week in a row for the first time since July 2020.