Oil futures extended a slump Wednesday, with the U.S. benchmark dipping below the $70 level and touching its lowest intraday level since December 2021 as the fallout from a banking crisis stoked recession fears.
Investors were also awaiting official data on U.S. crude inventories after industry data was said to show a rise in oil stocks but declines in gasoline and distillate levels.
- West Texas Intermediate crude for April delivery CL.1, -6.25% CL00, -6.25% CLJ23, -6.25% dropped $3.63, or 5.1%, to $67.68 a barrel on the New York Mercantile Exchange, hitting the lowest intraday level for a most actively traded contract since Dec. 20, 2021, according to FactSet.
- May Brent crude BRN00, -5.75% BRNK23, -5.75%, the global benchmark, was down $3.88, or 5%, at $73.57 a barrel on ICE Futures Europe.
- Back on Nymex, April gasoline RBJ23, -4.59% fell 4.2% to $2.445 a gallon, while April heating oil HOJ23, -4.42% was down 3.9% at $2.608 a gallon.
- April natural-gas NGJ23, -5.32% dropped 6.2% to $2.413 per million British thermal units.
Trouble in the banking sector has amplified fears that aggressive monetary tightening by the Federal Reserve and other central banks has set the stage for a sharp economic downturn.
Swiss banking giant Credit Suisse CS, -20.33% CSGN, -24.24% on Wednesday saw its shares fall to a record low, pressuring the European banking sector and financial markets days after two lenders collapsed in the U.S.
Oil failed to bounce alongside a modest rebound for equities on Monday, and extended losses as U.S. stocks fell sharply on renewed bank fears Tuesday, with the Dow Jones Industrial Average DJIA, -1.66% down 505 points, or 1.6%, and the S&P 500 SPX, -1.50% off 1.4%.
“Oil is getting destroyed, with big macro looking straight into the U.S. recession vortex and energy traders drawing straight-line parallels to prior bank sector-driven recessions, especially the 2008 financial crisis, which has similar overtones to the current financial tumult and when oil tanked,” said Stephen Innes, managing director of SPI Asset Management, in a note.
Innes said the lack of a “slingshot recovery” in China economic data following the country’s lifting of strict COVID levels and mounting worries over Credit Suisse “has opened the trap door for the oil market today and could be the nail in the coffin for the oil market rebound in Q1.”
The Energy Information Administration on Wednesday said U.S. crude inventories rose 1.6 million barrels last week. At 480.1 million barrels, U.S. crude oil inventories are about 7% above the five year average for this time of year, EIA said. Total motor gasoline inventories decreased by 2.1 million barrels, while distillate stocks declined 2.5 million barrels.
Analysts surveyed by The Wall Street Journal, on average, had looked for crude inventories to show a fall of 100,000 barrels, while gasoline stocks were seen down 1.2 million barrels and distillates down 600,000 barrels.
The American Petroleum Institute, an industry trade group, late Tuesday reported a 1.2 million barrel rise in U.S. crude inventories last week, according to a source citing the data, while gasoline inventories fell 4.6 million barrels and distillate stocks declined 2.9 million barrels.
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