Oil Prices Plummeted More Than 10 Percent Last Week

Last week, oil prices on global markets plummeted more than 10 percent as traders fear a new banking crisis and weakening demand, given that central banks are trying to slow down consumption and economic growth due to high inflation.

The price of a barrel on the London market fell nearly 12 percent last week, to $72.97, while on the American market, a barrel decreased by 13 percent, to $66.74.

Like the financial markets, the oil market was shaken last week by the collapse of two American banks, Silicon Valley and Signature, problems in several other American banks, as well as the second-largest Swiss bank, Credit Suisse.

Traders fear that a new banking crisis could trigger a recession, and thus a decline in oil demand. This is especially true as central banks are trying to weaken consumption and slow down economic growth due to high inflation.

Thus, last week, the European Central Bank raised key interest rates by another 0.50 percentage points, while this week, the American central bank might also raise rates.

Although fears of a banking crisis somewhat subsided in the second half of the week, oil prices did not recover.

– The existing fundamentals are not as bad as one might conclude from the price drop, but in such turbulence, oil is not considered a safe haven, like cash and gold, explains John Kilduff, a partner at Again Capital.

Support for prices was somewhat provided last week by the news of a meeting between Saudi Energy Minister Prince Abdulaziz bin Salman and Russian Deputy Prime Minister Alexander Novak, who discussed OPEC+’s efforts to maintain market balance and confirmed that the Organization of the Petroleum Exporting Countries (OPEC) and its allies would reduce production by two million barrels per day by the end of the year.

The price drop indicates a ‘continuously fragile market condition,’ said Ole Hansen from Saxo Bank.

In recent months, oil prices have moved within a relatively narrow range, but after last week’s sharp decline, they are now significantly down, about 15 percent, compared to the beginning of the year.