SVB fluctuation in oil

Oil had a volatile start to the week due to the impact of the collapse of SVB, the second-largest bank failure in US history, and Aramco’s forecast that daily consumption will rise to 102 million barrels by the end of 2023. US crude oil had a volatile start to the week, hovering around $77 a barrel, following the impact of the collapse of Silicon Valley Bank, the largest bank failure since 2008. While US officials made statements late on Sunday aimed at strengthening confidence in the banking system, Goldman Sachs withdrew its statement that the Fed would raise interest rates next week due to the ongoing crisis. This situation provided support for commodities and caused the dollar to fall. Investors began paying large premiums for bearish put options as the SVB collapse led to hedging against the risk of falling oil prices. The banking turmoil has added further volatility to the oil market, which has been buffeted this year by concerns about tightening monetary policy in the U.S. and optimism about China’s economic recovery. Many remain bullish on the long-term outlook, with Saudi Aramco forecasting consumption to hit a record 102 million bpd by the end of 2023. “Fear of further monetary tightening, combined with risks of financial contagion, has heightened concerns about weak demand. U.S. regulators’ measures to address the fallout from the SVB have provided some respite for the market,” said Charu Chanana, market strategist at Saxo Capital Markets Pte. The Organization of the Petroleum Exporting Countries and the International Energy Agency are scheduled to release monthly market reports this week, giving investors a snapshot of the supply and demand outlook.