On Tuesday, oil prices fell, making the previous day’s dip longer as the collapse of Silicon Valley Bank sparked fear about a money crisis.
The West Texas Intermediate (WTI) crude oil futures for April delivery decreased by -1.18% to $73.92 per barrel. It dipped to its lowest since December. Likewise, Brent oil for May shipment dropped by -1.13% to $79.86 a barrel on March 14’s Asian afternoon session. It marked its most bearish results since early January.
According to analysts, it was shocking to see oil declining since the Federal Reserve would find it difficult to raise interest rates. Furthermore, the situation could bring weakness in the dollar.
Moreover, the dollar index, measuring the greenback against six other currencies, dropped by 1.00% while treasury yields weakened. Besides, a lower dollar rate makes oil cheaper for holders of other currencies.
Also, high US oil storage has worsened concerns about the Fed’s tight grip on the monetary policy.
Moreover, in April, crude production will rise in the seven major US basins. As a result, they will climb to the highest level not seen since December 2019, as said by experts.
In addition, looking beyond the Silicon Valley Bank shockwaves, oil prices are weighed down. The pressures were amid hints of weaker-than-anticipated economic recovery in China, despite the lift of COVID-19 limitations, analysts added.
Russian Sanctions Shift Oil to Asia
Based on traders, Western sanctions on Russian oil have led to cheap fuel for Asia. Doing so ruined a decades-long trend wherein the continent pays more for the output than Europe.
Experts and government officials from buying countries use the term Asian premium in referring to higher prices. These costs are what Asian importers paid for oil offered by significant exporters. They include the Organization of the Petroleum Exporting Countries (OPEC) members.
According to analysts, the significant winners of the sanctions are India and China, the primary consumers in Asia.
Furthermore, as Europe loses Russian crude as a supply source, it must gather oil from other areas. Also, it is speculated that the Middle East pricing is worsening for the Europeans.