Fears of global economic recession, low demand dominate market after US bank failures, interest rate hike of European Central Bank
Oil prices edged higher on Friday after traders took advantage of profit-taking from low prices through the week despite a policy rate hike of the European Central Bank (ECB) and deepening economic worries after the collapse two major US banks.
International benchmark Brent crude traded at $74.92 per barrel at 9.26 a.m. local time (0626GMT), up 0.29% from the closing price of $74.70 a barrel in the previous trading session.
At the same time, American benchmark West Texas Intermediate (WTI) traded at $68.55 per barrel, a 0.29% increase after the previous session closed at $68.35 a barrel.
Both benchmarks have lost around 10% this week over fears of a global economic recession and low demand caused by the financial crisis in the US after collapse of Silicon Valley Bank and Signature Bank.
Intensifying concerns about the spillover effect of the US banking sector crisis, Zurich-based banking company Credit Suisse announced that it would borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank after its shares dropped nearly 30%.
Also, the ECB decision to increase its policy rate by 50 basis points to 3.5% on Thursday also put some downward pressure on prices, increasing expectations for a similar move in the US.
“Inflation is projected to remain too high for too long,”the ECB said in a statement after announcing its decision.
Oil prices have seen their lowest level since December 2021, with Brent dropping to $71.67 a barrel and WTI to $65.65 a barrel, however, prices recovered some of their weekly losses as traders cashed in on low prices.
Easing supply worries and downside pressure on prices, Russia’s Deputy Prime Minister Alexander Novak met with Saudi Arabia’s Energy Minister Abdulaziz bin Salman.
Both leaders discussed several issues, including achieving goals to maintain market stability and restore the balance of supply and demand on the global oil market.