Oil prices crater as banking fears rattle markets

NEW YORK, March 16 (Bernama-Xinhua) -- Oil prices suffered steep losses on Wednesday, pressured by mounting fears of a banking crisis.

The West Texas Intermediate (WTI) for April delivery dropped US$3.72, or 5.22 per cent, to settle at US$67.61 a barrel on the New York Mercantile Exchange, reaching its lowest level since December 2021.

Brent crude for May delivery lost US$3.76 dollars, or 4.85 per cent, to close at US$73.69 a barrel on the London ICE Futures Exchange.

The pullback came after a major rout on the oil market, which saw the US crude benchmark and Brent both shed more than 4 per cent on Tuesday, Xinhua reported.

Turbulence at Credit Suisse fuelled fears of a wider banking crisis.

Shares of Credit Suisse on Wednesday plunged to a record low after a top shareholder of the embattled Swiss bank said it would not make further investments in the firm.

The turmoil came just days after the failure of several US banks, which continues to send shock waves through the financial system.

"Another day another bank failure. The banking crisis is causing a deleveraging by big banks, pulling back their exposure to oil and causing prices to fall harder than other risk assets," Phil Flynn, senior analyst at The PRICE Futures Group, said Wednesday.

"The oil moves smack of market liquidation as opposed to anything directly related to current supply demand fundamentals," he said.

Traders overlooked data that showed a drawdown in US oil product inventories.

The US Energy Information Administration reported Wednesday that the country's total motor gasoline inventories decreased by 2.1 million barrels during the week ending March 10, while distillate fuel inventories fell by 2.5 million barrels.

Recent oil weakness "illustrates the extent to which oil prices have been influenced by the financial markets of late," echoed Carsten Fritsch, energy analyst at Commerzbank Research.

He noted that when financial markets went into crisis mode, oil came under selling pressure as a risky asset.

"In view of this, high volatility can also be expected in the coming days, with fundamental data likely to play only a subordinate role," Fritsch said.

BERNAMA-XINHUA