Mar 24, 2023
Oil dives afresh as equity markets slump and dollar rallies
The oil market is oversold: Analyst
Oil slumped the most in over a week, tracking a slide in equity markets and feeling the effects of a stronger dollar.
West Texas Intermediate fell as much as 4.4 per cent, the most since March 15. That would eliminate most of its gains for the week.
Equity markets weakened on Friday, led lower by a selloff in European banking stocks where there are fresh signs of stress. The dollar was up almost one per cent against the euro in mid-morning London trade, diminishing the global appeal of commodities that are priced in the U.S. currency.
Crude remains on course for its steepest first-quarter drop since 2020, when the pandemic wiped out demand. A potential U.S. recession, robust Russian oil flows in the face of Western sanctions, and strikes at refineries in France have all proved bearish forces.
“The banking crisis is spreading to real estate and that has the stock market back on the defensive, thereby once again reducing risk appetite,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank. “The dollar trades higher as U.S. and especially European stocks drop hard,” driving down broader commodities.
Signs that the U.S. Federal Reserve has reached the end of its tightening cycle gave wider markets — and oil — a lift earlier this week. West Texas Intermediate is currently on course for a gain of less than US$1 from a week ago.
- WTI for May delivery fell 3.5 per cent, trading at US$67.49 a barrel at 10:24 a.m. in London. It was down as much as 4.4 per cent earlier.
- Brent for May settlement dropped 3.4 per cent to US$73.37 a barrel.