Fears of default contagion have weighed heavily on Brent prices as traders assess the risk of Silicon Valley Bank (SVB) becoming the second coming of Lehman Brothers, Al Salazar, senior vice president at Enverus, told Rigzone Intelligence Research.
Salazar added, however, that “we’ve seen this movie before” and said that significant default/credit events such as S&P’s 2011 downgrade of US debt, the sovereign debt crisis 2012 Greek and several Chinese-owned/solar defaults, “have contributed to pockets. of oil price weakness, only to be dismissed by the most relevant fundamental oil drivers months later.”
“On the surface, SVB feels like an air pocket, while rising Chinese and Indian oil demand has more lasting influences on oil,” Salazar said.
Sarp Ozkan, Vice President of Commercial Product at Enverus, said: “SVB was a great provider of project finance for what was generally referred to as climate technology.”
“From their loans to large residential solar developer Sunrun to their extensive reach into the community solar space (62 percent of financings to date), they were a committed investor in the space. They also contributed a lot of capital to and all to early-stage projects and portfolios across solar, wind, battery storage and other relevant energy transition technologies,” Ozkan added.
“Of course, SVB’s fortunes were by no means a direct consequence of their interest or activity in this space, but it certainly creates a headache for the sector as a major financier exits the market,” Ozkan continued.
Silicon Valley Bank
On March 10, the Federal Deposit Insurance Corporation (FDIC) announced that Silicon Valley Bank in Santa Clara, California, was closed by the California Department of Financial Protection and Innovation, which it said appointed the FDIC as receiver.
“To protect insured depositors, the FDIC created the Santa Clara National Deposit Insurance Bank (DINB). At the time of closing, the FDIC as receiver immediately transferred to DINB all Silicon Valley insured deposits Bank,” the FDIC said in a statement from the organization.
“All insured depositors will have full access to their insured deposits no later than Monday morning, March 13, 2023,” the organization added.
Silicon Valley Bank had 17 branches in California and Massachusetts, the FDIC noted, adding that as of Dec. 31, 2022, the bank had $209 billion in total assets and about $175.4 billion in total deposits. The FDIC noted in its statement that Silicon Valley Bank is the first FDIC-insured institution to fail this year. The last FDIC-insured institution to close was Almena State Bank, Almena, Kansas, on October 23, 2020, the FDIC noted.
Brent Price
At the time of writing, the price of Brent crude is trading at $75.55 a barrel. The Brent price fell from a close of $82.78 per barrel on March 10 to a close of $72.97 per barrel on March 17. The March 17 close is the lowest so far in 2023 for Brent. The highest close for the 2023 commodity so far was seen on January 23 at $88.19 a barrel.
To contact the author, please email andreas.exarheas@rigzone.com
Photo Credit – iStock.com/Christian Horz
