Oil Prices Rise Again as Investors Await U.S. Inventory Data Amid Lack of News
According to Investing.com, there aren't any unexpected negative events affecting the banking industry currently. This is positive news for assets with higher risks, such as oil.
The cost of crude oil went up for the second day in a row at the beginning of this week. Prices increased by roughly 0.5% on Tuesday following a 5% jump the previous day. This was because Michael Barr, who is in charge of supervising the Federal Reserve, did not speak about concerns regarding the potential spread of the U.S. banking crisis. These concerns were first raised three weeks ago.
During his two-hour testimony before a Senate committee on banking, Barr discussed the insufficient risk management and other supposedly "secure" practices at Silicon Valley Bank. These shortcomings ultimately caused customers to withdraw billions of dollars in deposits from the California-based institution, as well as at least two other banks, which ultimately resulted in the crisis.
If traders were hoping to hear about widespread consequences from the Silicon Valley situation, they were disappointed as Barr did not report any such news.
Just to clarify, the person in charge of supervising the Federal Reserve has already stated in a speech before testifying on Monday that the central bank's investigation revealed that the banking system in the United States is stable and has the ability to recover from difficulties, with sufficient financial reserves and flexibility.
A wide-ranging surge in risk appetite broke out in commodity markets without any notable updates regarding the ongoing crisis. Even safe-haven options, such as gold, were lifted up by this rally. In particular, oil prices had taken a hit due to the banking crisis. They plummeted by 13% two weeks earlier but saw a partial recovery of 3% or more in the previous week. This was because large European banks, like Credit Suisse and Deutsche Bank (ETR:), also faced difficulties.
John Kilduff, partner at the New York energy hedge fund Again Capital, believes that the absence of news on banking matters is a positive development. However, Kilduff acknowledges that there is still a risk of a contagion spreading due to the ongoing crisis. He adds that while the situation may not be entirely resolved yet, the current state of calm in the banking sector is beneficial for risk assets.
The cost of WTI crude, which is exchanged in New York, reached $73.20 per barrel. This represents a 0.5% increase, or a gain of 39 cents, and builds upon the 5% jump observed the previous day.
The cost of oil traded in London increased by 53 cents, or 0.7%, to reach $78.65, following a 2.8% increase the day before.
Oil prices began to rise at the start of the week due to traders receiving news about Kurdistan's oil production being interrupted, as well as talk of nuclear war from Russian President Vladimir Putin. This caused a significant impact, with half a million barrels of oil being affected.
The financial world is keeping a close eye on the oil market to see if those who invested in the long term can recover from the big losses they're facing in the first quarter. This is particularly important as we near the end of March. At the moment, both WTI and Brent have dropped by approximately 9% each for this quarter as of Tuesday afternoon in New York.
Besides updates concerning American financial institutions and Kurdish resources, energy traders were also keeping an eye out for the weekly report on oil reserves from the American Petroleum Institute (API), which would be released after the markets close.
At around 4:30 pm Eastern Time (8:30 pm Greenwich Mean Time), the API will unveil a summary of the closing balances of crude oil, gasoline, and distillates for the week ending March 24. These figures are a preview of the forthcoming official inventory statistics from the U.S. Energy Information Administration, which will be released on Wednesday.
Investing.com's analysts monitored the data for the past week and anticipate a small increase of 0.092 million barrels, in contrast to the previous week's growth of 1.117 million barrels up until March 17th, which was reported by the EIA.
The forecast is that there will be a reduction of 1.617 million barrels, as compared to the previous week's decrease of 6.4 million barrels. The main fuel product in the United States is automobile gasoline.
The upcoming report predicts a decrease of 1.455 million barrels compared to the previous week's shortage of 3.313 million. Distillates, which are transformed into fuel for diesel trucks, buses, trains, and ships, as well as for jets, have been the most sought-after component of the United States' petroleum industry.
