Oil Set For Biggest Weekly Drop In Almost A Year On Bank Turmoil
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(Bloomberg) -- Oil is headed for the biggest weekly decline in almost a year after the worst banking sector turmoil since the financial crisis poisoned investor sentiment.
Futures in New York are set for a 12% weekly loss. While the failure of Silicon Valley Bank and troubles at Credit Suisse Group AG drove investors from the market, oil-options covering accelerated the selloff.
Still, market participants see reasons for optimism. Timespreads, one gauge of market health, are signaling greater strength than the front-month price, suggesting traders still see demand outstripping supply in the next few months.
“If the economy can hold, we should see demand once again gain on supplies in the fourth quarter,” said Dennis Kissler, senior vice president of trading at BOK Financial Securities. Yet, reaching $100 a barrel “is looking more difficult to achieve,” he said.
Until this week, the oil market had been stuck in a relatively narrow range as traders balanced the outlook for a rebound in Chinese demand and fears of a global recession.
Oil’s next leg may depend on decisions by the US Federal Reserve and the Organization of Petroleum Exporting Countries. The Fed will decide next week whether to raise rates again, a move that has implications for oil demand. Meanwhile, OPEC and its allies will convene April 3 to revisit the group’s production policy. Saudi Arabia and Russia, in a meeting this week, gave little indication that the cartel will change course.
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