LONDON – Oil prices fell to their lowest level in 15 months on Monday on concerns that risks in the global banking sector and a potential rise in US interest rates could trigger a recession that would undermine demand for the fuel .
In volatile trade, Brent crude futures for May fell $2.07, or 2.8%, to $70.90 a barrel at 0950 GMT. U.S. West Texas Intermediate crude for April delivery was down $1.88, or 2.8%, at $64.86 ahead of expiration on Tuesday.
The most traded May futures were down 2.8% at $65.06 a barrel.
Brent and WTI last hit record lows in December 2021, with WTI sinking below $65 a barrel. Both benchmarks lost more than 10% of their value last week as the banking crisis deepened.
The oil slump comes despite a landmark deal by UBS, Switzerland’s biggest bank, to buy Credit Suisse in an attempt to rescue the country’s second-biggest bank.
However, stocks and bank bonds continued to fall on Monday, in a sign that investor confidence remains fragile.
After the deal was announced, the US Federal Reserve, the European Central Bank and other major central banks pledged to improve market liquidity and support other banks.
“The market’s focus is on current volatility in the banking sector and the potential for further rate hikes by the Fed,” he said bathing Moorehead of commodities research at National Australia Bank.
The U.S. Federal Reserve is expected to raise interest rates by 25 basis points on March 22 despite recent turmoil in the banking sector, according to most economists polled by Reuters.
However, some executives are calling on the central bank to hold off on tightening monetary policy for now, but be ready to resume raising rates later.
“Volatility is likely to remain this week, with broader financial market concerns likely to remain at the fore,” analysts at ING Bank said in a note, adding that the Fed’s looming decision increases the Fed meeting of the week increases uncertainty in the markets.
Further, a ministerial committee of OPEC and producer allies, including Russia, collectively known as OPEC+, is scheduled for April 3. The group agreed in October to cut oil production targets by two million barrels per day until the end of 2023.
