We had the COVID crisis as well as the lockdown of the Chinese economy. Both of these factors failed to bring the crude oil below its support of $70. But it appears the recent banking crisis has managed to do what even COVID failed to do!
On Wednesday, the WTI benchmark was down by 7% and dipped below the price of $70/barrel. Such low prices were only last seen in December 2021.
The banking crisis started with the collapse of a few US banks, especially the Silicon Valley Bank. Now, it appears that the banking crisis has made its way into Europe as well.
Credit Suisse Group came under the spotlight after a major investor withdrew their support. This pushed most of the banking stocks to turn lower, which ultimately affected the crude oil prices as well.
According to Again Capital hedge fund, the oil market is highly turmoil and it has to do a lot with the banking crisis. In fact, the banking crisis that started in the USA has now turned global.
It appears that liquidity is an even more important factor for the oil market than the Chinese demand. After all, even the low Chinese demand failed to bring the oil down under $70 per barrel.
At the time of writing this, the TWI was trading near $65.70, which is its lowest level since the 2nd of December 2021. At that time, the WTI reached $62.43, which was a record on its own.
Overall, the WTI has lost almost 12% in the last two sessions which means there's more than what meets the eye. If we look at the UK, the Brent Crude Oil benchmark was trading around $73.69 after losing 4.9%.
If the banking crisis fails to be brought under control, it could even push the crude oil further down as it would lead to liquidity issues.