Crude oil prices remained subdued today, pressured by data pointing to a slowdown in China’s recovery and the second-biggest bank collapse in the United States since the 2008 crisis.
At the time of writing, Brent crude was trading at $79.11 per barrel and West Texas Intermediate was at $75.45 per barrel, both slightly down from opening.
Earlier this week, China released data pointing to a surprise contraction in manufacturing activity that suggests oil demand growth may falter in the world’s largest importer.
Separately, California financial market regulators seized First Republic Bank and put it in FDIC receivership before selling its assets to JP Morgan. The collapse of the bank was the third major one in just two months. The collapse was caused by a drop in depositors’ confidence that prompted massive deposit outflows.
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These events have fueled a crisis of consumer confidence in the U.S. banking system despite repeated assurances from government officials that the system is stable.
Expectations that the Federal Reserve will raise interest rates again later this week did not help oil’s prospects either. Although the hike is expected to be smaller than previous ones, at 25 basis points, the fact that there is a need for further hikes has negative implications for the state of the U.S. economy, hence for oil demand.
At the same time, prices continue to receive some support from lower OPEC+ production and expectations that U.S. oil inventories will book yet another draw for last week. If they do, it would be the third weekly draw in a row.
The American Petroleum Institute is reporting weekly inventory data later today, followed by the Energy Information Administration tomorrow.
Also, Chinese travel data remains robust, suggesting that despite the contraction in manufacturing activity, oil demand is in a healthier place than it was a year ago.
By Irina Slav for Oilprice.com