Oil rises 2% in retreat from 15-mth low as banking fears subside
By Arathy Somasekhar
HOUSTON (Reuters) - Oil prices rose more than 2% on Tuesday, extending a retreat from a 15-month low hit the previous day, as the rescue of Credit Suisse (SIX: CSGN ) allayed concerns of a banking crisis that would hurt economic growth and cut fuel demand.
Measures to stabilise the banking sector, including a UBS takeover of Credit Suisse and pledges from major central banks to boost liquidity, have calmed fears about the financial system that roiled markets last week.
"Fears of a banking crisis and a recession have eased, brightening the oil demand outlook at least for now," said Fiona Cincotta, Senior Financial Markets Analyst at City Index.
Brent crude settled up $1.53, or 2.1%, at $75.32 a barrel, while U.S. West Texas Intermediate (WTI) closed up $1.69, or 2.5% to $69.33.
On Monday, both benchmarks ended about 1% higher after falling to their lowest since December 2021, with WTI sinking below $65 at one point. Last week, they shed more than 10% as the banking crisis deepened.
"A 'risk back on' sentiment seems to be coming back to crude, as the latest selloff may very well have been exaggerated liquidation," said Dennis Kissler, senior vice president of trading at BOK Financial.
The U.S. Federal Reserve started its monetary policy meeting on Tuesday. Markets expect a rate hike of 25 basis points, down from previous expectations of a 50 bps increase. Some top central bank watchers have said the Fed could pause further rate hikes or delay releasing new economic projections.
Wall Street indexes also closed sharply higher on Tuesday as fears over liquidity in the banking sector abated and market participants eyed the Fed.
Meanwhile, U.S. crude oil inventories rose by about 3.3 million barrels last week, according to market sources citing American Petroleum Institute figures. That compared with Reuters estimates for a draw of 1.6 million barrels.
Figures from the U.S. Energy Information Agency are due on Wednesday.
A meeting of ministers from OPEC+, which includes members of the Organization of Petroleum Exporting Countries plus Russia and other allies, is scheduled for April 3. OPEC+ sources told Reuters the drop in prices reflects banking fears rather than supply and demand.
Hedge fund manager Pierre Andurand agreed the latest price drop was speculative and not based on fundamentals. He predicted oil will hit $140 a barrel by year end.
The CEO of energy trader Gunvor, Torbjorn Tornqvist, said he expected oil prices to move higher toward year end as rising Chinese demand tightens the market further.
Money managers cut their net long U.S. crude futures and options positions in the week to March 14, the U.S. Commodity Futures Trading Commission (CFTC) said.
(This story has been corrected to fix closing price for Brent crude to $75.32 a barrel, not $69.33, in paragraph 4)
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