Ease in crude oil prices following bank crisis

Crude oil rallied overnight as the Federal Deposit Insurance Corporation (FDIC) lifted conception and announced a bailout of Silicon Valley Bank Financial. The falling US dollar and supply concerns have given some impetus to growth.

The purchase of the Silicon Valley Bank by First Citizen Bank and Trust Company has so far allayed fears of contagion with banking troubles. The FDIC’s filing cited mismanagement as the primary cause of the tech bank’s collapse.

Monday’s report that First Citizens BancShares Inc will take over deposits and loans from ailing Silicon Valley Bank has sparked optimism about the health of the banking sector that has rocked financial markets.

While some media have attributed this rise to Iraq’s decision to shut down the Iraqi Kurdistan-Turkey pipeline following international arbitration, the number of barrels at stake should not be enough to cause the oil price needle to move sharply.

It has been speculated that the 400,000 bpd tap closures from Iraq’s Kurdistan Region could offset an expected market loss of 500,000bpd of Russian oil, which was reported as part of a production cut that appears yet to have materialised.

Volatility in oil prices caused Russian President Vladimir Putin to declare over the weekend that Moscow will make Belarus a tactical nuclear weapons depot.

The US session ended with WTI futures prices up more than 5% above $73 on the day. At the same time, oil price volatility has eased from last week’s peak, which may indicate some level of comfort in the recovery.

The crack spread between WTI oil futures, and RBOB gasoline futures could also support the current price action. The crack spread divides the price difference between WTI crude oil and RBOB refined gasoline.

Oil prices overview

• Brent crude was trading up at 4.21%, for an increase of $3.16 at $78 per barrel
• West Texas Intermediate (WTI) was trading up at 5.30% for an increase of $3.67 at $72.93 per barrel
• China’s crude oil should increase by 6.2% to 540 million tonnes in 2023, according to the annual forecast by the research unit of China National Petroleum Corp on Monday
• Last week, the US crude oil stockpiles increased by about 200,000 barrels, according to a preliminary Reuters poll on Monday

Oil company stocks were also increasing, for example:

• Exxon increased by nearly 2.2% at the same time
• Shares of Chevron increased by over 1%
• Apache Corporation also increased by 2.5%
• ConocoPhillips rose by 2.15%
• Marathon Petroleum Corp rose by 3.4%