Oil prices dropped to their lowest in 15 months on March 20, driven down by concern that risks in the global banking sector and a potential increase to U.S. interest rates could spark a recession that would sap fuel demand.
In volatile trading, Brent crude futures for May fell 87 cents, or 1.2%, to $72.10/bbl by 1211 GMT. The U.S. West Texas Intermediate crude contract for April was down 85 cents, or 1.3%, at $65.89 before its expiry on March 21.
The more actively traded May futures were down 1.2% at $66.11/bbl.
Brent and WTI earlier fell by about $3, hitting lows last registered in December 2021, with WTI sinking below $65 a barrel. Both benchmarks shed more than 10% of their value last week as the banking crisis deepened.
The slide in oil comes despite the historic deal for UBS, Switzerland's largest bank, to buy Credit Suisse in an attempt to rescue the country's second-biggest bank.
However, banking stocks and bonds continued to plunge on March 20 in a sign that investor confidence remains fragile.
After the deal was announced, The U.S. Federal Reserve, European Central Bank and other major central banks pledged to enhance market liquidity and support other banks.
"The market focus is on current banking sector volatility and the potential for further rate hikes by the Fed," said Baden Moore, National Australia Bank's head of commodity research.
The U.S. Federal Reserve is expected to raise interest rates by 25 basis points on March 22 despite the recent banking sector turmoil, according to most of the economists polled by Reuters.
However, some executives are calling on the central bank to pause its monetary policy tightening for now but be ready to resume raising rates later.
"Volatility is likely to linger this week, with broader financial market concerns likely to remain at the forefront," ING Bank analysts said in a note, adding that the looming Fed decision increases week's Fed meeting adds to uncertainty in markets.
Further out, a ministerial committee of OPEC and producer allies including Russia, together known as OPEC+, is set for April 3. The group agreed in October to cut oil production targets by 2 MMbbl/d until the end of 2023.
Baytex Brings Production Back Online Following Wildfires
2023-05-30 - Baytex Energy estimated that approximately 12,500 boe/d was curtailed for the month of May.
Pemex Submits Zama Field Plan with Talos, Partners to Mexican Authorities
2023-03-24 - The shallow GoM discovery, made by Talos Energy, could produce 180,000 bbl/d for Pemex, about 10% of Mexico’s current oil output.
Saudi Arabia Crude Exports Slip in February
2023-04-17 - Saudi Arabia's energy ministry is also voluntarily cutting oil production by 500,000 bbl/d from May until the end of 2023.
BP Ventures Back Into Oil Frontiers to Boost Output
2023-05-10 - BP has started drilling a wildcat well off Canada's coast and revived the development of a Gulf of Mexico reservoir.
What's Affecting Oil Prices This Week? (May 15, 2023)
2023-05-15 - The price of oil is facing headwinds from several factors, including concerns about the U.S.' regional banking sector and the impending U.S. debt limit.