International oil prices dropped below $80 as investors expressed concern over the bankruptcy of Silicon Valley Bank (SVB), bringing about concerns of a potential financial crisis.
In afternoon trading on the London market, the barrel cost was $79.66. Meanwhile, on New York barrel was $73.56.
During the morning trading session, the price of oil continued to drop. According to OilPrice.com, the current price of Brent oil is $78.54, while WTI oil is lower at $72.36.
At the commencement of the week, the bankruptcy of the SVB caused reverberations through the markets. Focusing on the startup market, the bank has invested depositors’ funds into purchasing government bonds. Its price dropped drastically following the conclusion of the US central bank’s asset-purchasing scheme last year and the raised interest rates to control inflation.
Regulators in the US shut down SVB and two other banks, leading traders to worry that the panic of 2008 could be resurrected, causing a drastic drop in bank stocks.
Oil prices dropped to their lowest level since December, following the trend of the stock markets.
Commerzbank analysts anticipate dynamic fluctuations in oil prices in the upcoming days. UBS suggests that the issues facing regional American banks will only have a minimal impact on the commodities markets.
Likely rise in interest rates
Carsten Menke of UBS stated that the episode with the regional US banks on Monday was largely overblown and that it should not have any lasting consequences for commodity markets in the foreseeable future.
Traders estimate that, given the SVB’s downfall, the US central bank will likely raise interest rates next week by only a quarter of a percentage point instead of a half.
A gentler rise could result in a weakened dollar, assisting oil prices as it would assist purchasers with other currencies.