Oil prices rose on Monday, recouping some recent losses as the Federal Reserve and other major central banks announced new liquidity measures to stabilize financial markets, while a takeover of beleaguered Swiss lender Credit Suisse (SIX:CSGN) helped ease fears of a banking crisis.
Crude markets were still nursing their worst weekly loss this year as investors sold heavily on concerns that an economic slowdown this year will stymie oil demand. Anticipation of a Fed meeting this week also kept gains limited on Monday.
But with the Fed, European Central Bank and other major central banks pledging to increase market liquidity to support the banking sector, fears of an imminent banking crisis were somewhat assuaged.
The move came shortly after Swiss bank UBS Group AG (NYSE:UBS) announced that it will buy beleaguered peer Credit Suisse Group (NYSE:CS) in a “historic deal” facilitated by regulators, which helped ease concerns over a broader banking rout.
Brent oil futures 0.5% to $73.30 a barrel, while West Texas Intermediate crude futures rose 0.5% to $67.25 a barrel by 22:05 ET (02:05 GMT). Both contracts lost over 10% last week in their worst weekly loss this year.
Crude prices were hammered by concerns that a banking rout could spill over into the broader economy, denting activity and potentially damaging crude demand. Fears of slowing demand have weighed heavily on oil markets this year, keeping prices largely depressed.
Focus is now squarely on the results of the Fed’s two-day meeting on Wednesday, where the central bank is expected to hike interest rates by a relatively smaller 25 basis points.
A slower pace of interest rate hikes by the Fed is also expected to provide relief to oil markets by weighing on thedollar.
The greenback was flat against a basket of currencies on Monday. But with fresh liquidity measures and a less hawkish Fed, the currency is expected to retreat in the coming days.
A weaker dollar makes commodities priced in the greenback cheaper for international buyers.
But oil also faces other headwinds. A consistent build in U.S. inventories points to a potential supply glut in the world’s largest oil consumer, while major crude importer China saw a sluggish recovery in oil imports despite the lifting of anti-COVID measures.
On the other hand, oil bulls were still holding out hopes for more production cuts by the Organization of Petroleum Exporting Countries and allies (OPEC+), following meetings between Russian and Saudi Arabian ministers last week.
Sources: Investing