Brent crude oil prices sank back below the $80 threshold on Tuesday as the markets remained unsteady following the Silicon Valley Bank collapse.
The price of the Brent crude oil benchmark fell below to $79.00 on Tuesday morning in volatile trade—a more than 2% drop on the day. Oil prices began a hefty slide on Monday, losing $2 per barrel, as the market feared a wave of bank failures in light of the SVB shutdown as it helped to highlight possible economic sinkholes that were created by continued rate hikes.
The oil industry’s pricing fate would have been even more pronounced if it hadn’t been for positive Chinese demand data. OPEC revised up its forecast for Chinese demand growth to 710,000 bpd.
Washington had stepped in to calm the markets on Sunday, pledging that banks—not taxpayers—would bear the losses through the use of the money banks paid into the Deposit Insurance Fund.
WTI prices saw a steep decline on Tuesday as well, dropping below $73 per barrel at one point before recovering slightly.
WTI has seen a nearly $4 per barrel loss so far this week, while Brent crude has seen a loss of more than $3 per barrel to the lowest price point of the year.
The news of the bank collapse and subsequent fears that the condition could be contagious are seen by some as unfounded fears unrelated to the commodities markets.
“We see Monday’s developments around the regional U.S. banks as more noise than news for commodity markets, and it should not have any meaningful medium- to longer-term impact,” a UBS analyst told Reuters on Tuesday.
Goldman Sachs has predicted that the bank collapse will cause the Feds to change course and pause rate hikes during the meeting next week.