By Barani Krishnan
Investing.com – The might of China and its COVID crisis couldn’t break oil’s $70 support. It had to take a banking crisis to do it.
U.S. crude’s benchmark fell 7% or more on Wednesday, to below $70 per barrel the first time since December 2021, as the banking crisis that began with the collapse of mid-sized Californian lender Silicon Valley Bank now threatens Europe-based Credit Suisse — one of the world’s preeminent names in investment banking.
“All hell’s breaking loose in oil and it has everything to do with the U.S. banking crisis that’s now going global,” said John Kilduff, partner at New York-based energy hedge fund Again Capital. “There is something after all more potent than Chinese demand for oil — liquidity.”
WTI, as the U.S. crude benchmark is known by its initials, fell to as low as $65.70 a barrel by 1:00 PM ET (17:00 GMT), marking a bottom not seen since December 2, 2021 when it touched an intraday low of $62.43.
With its drop of more than 6% in the previous two sessions, WTI’s losses on the week now amount to more than 13%.
U.K.-traded was down $5.50, or 7.1%, to $71.95 per barrel, after an intraday low at $71.77. Like WTI, the global crude benchmark has lost 13% since the start of the week.
The path of least resistance for oil was lower, with WTI’s next stop seen at below $64, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“With the day’s bottom now at below the 200-week SMA of $66.18, WTI is open to plumbing $63.40,” Dixit said, using the Simple Moving Average for the U.S. crude benchmark.
Credit Suisse’s share price plunged 28% in the biggest one-day selloff on record, leaving it down more than 75% over the past year, as questions grew about its solvency.
The crisis at CS came into greater focus on Wednesday after its biggest shareholder Saudi National Bank responded with an emphatic “absolutely not” when asked if it was open to doing further cash injections into the Zurich-based investment bank.
Notwithstanding the cold response, Credit Suisse has still appealed to its largest shareholder for a “public show of support”, the Financial Times reported.
The Zurich-based investment bank has also appealed to its central bank for support, the FT reported, with another headline saying: “The Swiss government faces pressure from at least one major government to intervene on Credit Suisse.”
In the United States, the Treasury Department said it was reviewing U.S. banks’ exposure to Credit Suisse.
Wednesday’s selloff in oil came despite a drop in U.S. fuel stockpiles reported by the Energy Information Administration, or EIA.
fell by 2.061M barrels last week, versus the forecast decline of 1.820M and against the previous week’s deficit of 1.134M. Automotive fuel is the No. 1 U.S. fuel product.
Distillate stockpiles also fell after rising for three previous weeks. Distillates are refined into , diesel for trucks, buses, trains, and ships, and fuel for jets, and are among the strongest demand components of the U.S. petroleum complex.
fell by 2.573M versus the expected slide of 1.172M. In the previous week, distillates rose by 0.138M.
Bucking the trend were U.S. crude stockpiles, which resumed their climb last week after a one-week decline.
rose by 1.55M barrels during the week ended March 10, the EIA reported.
In the previous week to March 3, crude inventories fell 1.694M barrels after 10 straight weeks of builds that added some 60 million to stockpiles amid seasonal maintenance and other disruptions at U.S. refineries that led to less processing of oil. An unseasonably warm winter had also created less need for heating oil.