Prices of oil in the United States declined on Tuesday due to the persistent banking crisis causing the oil market’s confidence to remain low.
Reuters reported that Brent crude futures for May, 2023 delivery fell 1% or 71 cents to $73.08 per barrel, while U.S. West Texas Intermediate crude futures dropped 1.1% or 74 cents to $66.90 per barrel.
Brent crude futures are agreements to buy or sell a certain amount of oil at a specific price and time in the future, based on the price of Brent crude oil.
Previously Brent and WTI crude prices initially dropped by around $3 per barrel before rebounding. This occurred following Credit Suisse receiving assistance from UBS and prominent central banks pledging to improve market liquidity and support the banking industry.
On Tuesday, the April 2023 WTI contract will come to an end, while the May contract, which is currently the most actively traded, dropped 0.9% or 64 cents to reach $67.18 a barrel.
According to experts from Haitong Futures, “Oil prices now mainly depend on influences on investor confidence at the macro-level. If the banking crisis does not spread further, market sentiment may stabilise and oil prices will have a chance to recover.”
The Federal Reserve’s verdict on whether or not to raise interest rates and, if so, by how much, following a two-day meeting on Wednesday will be a factor that will impact investor confidence and, consequently, oil prices. This was according to the report.
Following the commencement of the banking crisis this month, the expected estimate of the next Federal Reserve move has decreased from 50 bps to 25 bps, as per the market estimate.
In the meantime, G7 officials have indicated that “the Group of Seven Nations was unlikely to go ahead with a planned revision of a $60-per-barrel price cap on Russian oil.”
The European Commission conveyed to EU countries’ ambassadors over the weekend that there was no pressing desire within the G7 for an immediate review.
OPEC+ will hold a meeting on April 3rd, consisting of the world’s top oil exporting countries and their allies, including Russia. The group agreed in October to lower the daily oil production target by 2 million barrels until the end of 2023.
U.S. crude exports to Europe have reached a record average of 2.1 million barrels per day this month, propelled by a decline in WTI’s price relative to Brent, and decreased demand for oil by U.S. refineries.
