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How Can Bank Failures in the US Affect Oil Prices?

Short-Term oil prices predicted to stay between $75 and $80 due to US bank failures.

Emma Veress by Emma Veress
March 21, 2023
in Economy
Reading Time: 3 mins read
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Supply And Demand Are Not What Drives Down Oil Prices
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According to predictions, short-term oil prices will remain between $75 and $80 because of bank failures in the United States. Randall Mohammed, Managing Director of PetroIndustrial Oil Storage Solutions Company, stated that the effect of the banking crisis on oil prices will not persist for a very long time. Oil prices are still under pressure due to the financial crisis that was sparked by American bank failures, which is also having a negative impact on the outlook for global oil consumption. It is predicted that these changes will only have a “short-term” effect on the oil markets, with prices remaining between $75 and $80 per barrel.

The process, which began with the failure of Silicon Valley Bank (SVB) and Signature Bank in the United States, intensified with the happenings at First Republic in the United States and Credit Suisse in Switzerland.

Financial Crisis and Bankruptcies Bring Oil Prices to 15-Month Low

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Although the US Federal Reserve’s (Fed) monetary policy was recognized as one of the key causes of the banking crisis, the Fed is anticipated to take a more cautious approach in the wake of these developments, which also fanned worries about a worldwide economic slump.

Oil prices plummeted to their lowest points in the previous 15 months as investors focused on the actions that the US and European central banks would take, even as market volatility rose due to worries that the bankruptcies that started in the US would lead to a crisis in the global financial system.

The barrel price of Brent type oil, which is considered as an international standard, fell to $ 71.44 on Friday. The price of a barrel of WTI oil was $65.27. Hence, since December 2021, both forms of oil had their lowest levels.

Supply And Demand Are Not What Drives Down Oil Prices

According to Randall Mohammed, Managing Director of PetroIndustrial Oil Storage Solutions Company, the decline in oil prices was brought on by a rise in US oil stockpiles, worries about the banking industry sparked by the collapse of the SVB, and a potential Fed interest rate hike.

How Can Bank Failures in the US Affect Oil Prices?

Mohamed remarked, “Because the current drops in oil prices have a financial basis, they have little bearing on global oil supply and demand. As a result, the banking crisis won’t have a long-term effect on oil prices “said.

Stabilization of Oil Prices with Government Intervention, OPEC+ Group, and Weak US Dollar Course

Mohammed noted that local banks in the USA were the only ones affected by the crisis and that the rapidly dropping oil prices partially stabilized as a result of government intervention “The OPEC+ group’s claim that there is no supply-side issue, growing Chinese demand, and the relatively weak US dollar course all supported this recovery. Estimated oil prices range from $75 to $80 per barrel “used the words.

G7 Nations Set a Cap on Russian Oil Exports at $60 per Barrel, with Limited Impact on Current Oil Price

Kate Dourian, a visiting lecturer at the Arab Gulf Countries Center in Washington, commented on the downward impact on oil prices as follows: “The OPEC+ group will need to step in if the price declines continue. More intriguingly, the G7 nations set a cap on Russian oil exports at a price of $60 per barrel. The costs are already listed here. Since the price is currently in the 72-dollar range, Russia won’t be much affected by the 60-dollar ceiling price “made its evaluation.

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Emma Veress

Emma Veress

Hello there! My name is Emma, and I'm a daily breaking news journalist covering finance, economics, and crypto on a global scale. I graduated from Eötvös Loránd University with a degree in Communication and Media Studies MA, where I gained a passion for storytelling and analysis.As a journalist, I'm dedicated to providing my readers with accurate and timely news on financial and economic events happening around the world. I believe that by delivering high-quality journalism, I can help people make informed decisions about their finances and investments.

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