Oil futures: Prices up 3.5% as US Treasury looks to sooth banking fears
Quantum Commodity Intelligence - Crude oil futures Monday were trending higher, as US officials attempt to calm nerves after this month's banking crisis rocked financial and commodities markets.
May ICE Brent futures were trading at $77.60/b (1710 GMT), compared to Friday's settle of $74.99/b, while the more-liquid Jun23 contract was trading at $77.22/b versus Friday's close of $74.59/b
At the same time, May23 NYMEX WTI was trading $72.01/b versus Friday's settle of $69.26/b.
"The banking crisis that has roiled financial markets this month has particularly impacted the energy sector, with WTI and Brent crude oil trading down by more than 10%," said Ole S Hansen, Head of Commodity Strategy at Saxo Group.
"Months of range bound trading had lowered volatility, thereby supporting bigger risk taking. Crude oil broke support and that opened the floodgates to selling, not only from the long liquidation but also from fresh short selling attempts," added Hansen.
However, the US Treasury Department issued a statement late Friday following a high-level meeting, hoping to alleviate fears over further contagion.
"The Council discussed current conditions in the banking sector and noted that while some institutions have come under stress, the US banking system remains sound and resilient," referencing the Financial Stability Oversight Council.
"Oil prices are extending gains from the previous week as investors weighed up efforts by the authorities to calm concerns regarding the global banking system. optimism that there could be more support coming has boosted the market mood and has seen investors rein in recession fears," said City Index analyst Fiona Cincotta said Monday.
First Citizens Bancshares Inc. has agreed to buy Silicon Valley Bank, which analysts said helped to stabilise the US regional banking sector.
Prices also found support Monday after Iraq's northern oil exports were suspended after an international court of arbitration ruled Turkey had violated a bilateral treaty by facilitating independent pipeline flows from the Kurdistan Regional Government.
Volatility
Volatility levels are expected to remain elevated heading into the new month, while some analysts expect oil prices to fall further.
JPMorgan's Head of EMEA Energy Equity Research, Christyan Malek, said the price of Brent crude could fall below $60/b due to the current surplus in oil and uncertainty over OPEC's reaction to the decline in prices.
"Brent probably can go much lower. I think it could break $60 in the near-term," Malek told Bloomberg TV.
Investors dumped bullish bets on crude, diesel and gasoline again last week as concerns over the global banking system ratcheted higher and weighed on the outlook for oil demand.
Money managers cut long Brent crude positions by 38.4 million barrels to 234 million barrels as of 21 March, according to the latest exchange data, while short positions jumped nearly 23 million barrels.
Industrial action across France continues to support global refined products, as Exxon's 240,000 bpd Port Jerome refinery became the fourth French refinery forced to halt operations over the weekend.
Vessel tracking firm Kpler estimated gasoline and diesel supply from French refiners could be as much as 65% down if the strikes continue.
Eurobob oxy E5 gasoline closed Friday at a five-month high of $21.85/b above ICE Brent crude, from $15.29/b a week ago.
Backwardation on M1-M2 gasoline swaps also topped $20/mt for the first time since October 2022, when a round of French strikes last spilled over into European supply.
