Investing.com - The “bleeding” in oil seems to have stopped after three days, with crude prices hitting lows not seen since 2021.
But there’s no sign of a major rebound coming as yet as ructions in U.S. banking and the economy continue their vice grip on risk markets.
New York-traded West Texas Intermediate, or WTI, crude settled Wednesday’s trade down just 4 cents, or 0.06%, at $68.56 a barrel after losing a combined more than $8, or 11%, over three prior trading sessions. Thursday’s low of $63.70 marked a bottom for WTI not seen since November 2021.
London-traded Brent for July delivery rose for the first time in four days, finishing up a modest 17 cents, or 0.2%, at $72.50. The session low for Brent was $71.42, which marked a bottom not seen since December 2021.
It has been a dramatic fall from grace for oil in just a month after the much-glorified OPEC+ production maneuver that added almost $15 to a barrel in early April, after another round of selloffs then sent crude prices to 15-month lows.
OPEC+, which groups the 13-member Saudi-led Organization of the Petroleum Exporting Countries with 10 independent oil producers, including Russia, announced in early April that it will cut a further 1.15 million barrels from its daily output, adding to an earlier pledge from November to take off 2.0 million barrels per day.
OPEC+, however, has a history of over-promising and under-delivering on production cuts. While the group achieved over-compliance on promised cuts in the aftermath of the 2020 coronavirus breakout, experts say that was more a result of battered demand that led to minimal production, rather than a will to cut barrels as pledged.
Probably sensing that the oil trade may not be as responsive to another production maneuver right away — OPEC+’s next meeting is only in June, anyway — the cartel’s chief Saudi Arabia announced a unilateral price drop of 25 cents a barrel for Asian buyers of its oil.
But the kingdom raised the selling price of Arab light to North West Europe by $2.10 above the settlement of Brent to leverage on any lost income from the price drop of the past month.
“Crude prices remain heavy on weakening demand from Asia and [the] U.S banking turmoil, [which] will eventually cripple the world's largest economy,” said Ed Moya, analyst at online trading platform OANDA.
Moya said the Saudi price reduction to Asia, as modest as it was, “confirms slowdown fears”.
“This banking crisis might make the oil market start pricing a much worse recession for the US, which is bad news for the crude demand outlook. If equities continue to plunge here, oil might struggle finding support around the mid-$60s. The outlook for the economy is getting uglier by the day and that is making it easier for energy traders to jump on the momentum selling that is hitting WTI crude.”
Ahead of Friday’s trade, WTI was already down 11% on the week, after prior weekly losses of 1.2% and 5.8%.
Brent was staring at a potential weekly loss of nearly 9%, after earlier weekly drops of 2.6% and 4.9%.