Oil futures ended lower Monday as the collapse of Silicon Valley Bank over the weekend stirred fears of a potential recession.
SVB collapsed on Friday, while New York regulators closed down Signature Bank on Sunday. Federal regulators moved Sunday to make depositors at the banks whole, while backstopping deposits at other regional banks in an effort to prevent a run on other institutions.
Price action
-
West Texas Intermediate crude for April delivery
CL.1,
-2.88%
CL00,
-2.88%
CLJ23,
-2.88%
fell $1.88, or 2.5%, to close at $74.80 a barrel on the New York Mercantile Exchange.
-
May Brent crude
BRN00,
-0.42%
BRNK23,
-0.42%,
the global benchmark, declined $2.01, or 2.4%, to settle at $80.77 a barrel on ICE Futures Europe.
-
Back on Nymex, April gasoline
RBJ23,
-2.31%
fell 2.1% to finish at $2.5914 a gallon, while April heating oil
HOJ23,
-0.05%
declined 0.4% to $2.7615 a gallon.
-
April natural gas
NGJ23,
+8.15%
jumped 7.2% to $2.606 per million British thermal units.
Market drivers
Regulators late Sunday guaranteed all deposits at SVB and Signature Bank, while the Federal Reserve announced a new facility aimed at ensuring customers at all banks would have access to their deposits as they attempted to stave off a series of bank runs.
SVB was closed by California regulators on Friday, marking the second largest bank collapse in U.S. history.
Read: SVB collapse means look out for more stock-market volatility, say analysts.
But jitters remained. While U.S. stocks gained ground, albeit in choppy trade, investors continued to pile into safe-haven assets like U.S. Treasurys and gold, while shunning other commodities.
“Energy traders were not expecting the collapse of the 16th-largest lender in America to trigger a major risk-aversion wave that would send Brent crude below the $80 a barrel level,” said Edward Moya, senior market analyst at Oanda, in a note.
“The chaos in the bond market is also weighing on commodities. Oil’s roller-coaster ride won’t be anytime soon as Tuesday’s inflation report could upend the rally hitting Treasuries,” he said.
Need to Know: SVB’s rescue means the Fed won’t hike rates in March, says Goldman Sachs
Downside, however, may be limited by reports of strong buying from China, said analysts at ING, in a note, a move that ties in with a narrowing of the price spread between Brent and Dubai crude.
“This makes sense given the demand recovery that is expected not only from China but broader Asia following a relaxation in China’s [zero-COVID] policy late last year,” they wrote.
