Oil prices continue to decline on Tuesday amid a general withdrawal of investors from risk due to the situation around Silicon Valley Bank in the United States.
May Brent crude futures on London’s ICE Futures exchange stood at $79.91 a barrel by 7:05 a.m., down $0.86 (1.06%) from the previous session’s closing price. Those contracts fell $2.01 (2.4%) to $80.77 a barrel on Monday.
The price of WTI April futures on NYMEX fell by $0.82 (1.1%) to $73.98 per barrel by that time. The contracts value has fallen by $1.88 (2.5%) to $74.8 per barrel at the end of previous session.
As it was informed, Silicon Valley Bank last Friday was taken over by the Federal Deposit Insurance Corporation. The latter transferred assets of the bank to a new legal entity and promised to provide full compensation to all depositors.
In connection with these events, the Federal Reserve System (FRS) announced a new mechanism for providing funds to financial institutions totaling $25 billion.
On Tuesday, traders’ attention is focused on U.S. consumer price data for February, which is important for the Fed’s decision on the future level of the benchmark interest rate.
The futures market estimates a less than 50 percent chance of a 25 basis points (bps) Fed rate hike at the March meeting, although last week traders considered a 50 bps hike to be the most likely scenario, Bloomberg notes.
“The oil market could not avoid the consequences of the Silicon Valley Bank collapse,” notes Warren Patterson, who is in charge of commodity markets strategy at ING Groep NV. – High market volatility may persist in the short term, given the upcoming release of U.S. inflation data.”
OPEC will release its monthly oil market report on Tuesday, and the market awaits a similar review from the International Energy Agency (IEA) on Wednesday.
