Oil prices remained weak today, under pressure from a slowing recovery in China and data pointing to the second largest US bank failure since the 2008 financial crisis.
At the time of writing, Brent crude is trading at $79.28 a barrel and West Texas Intermediate at $75.64 a barrel, both down slightly from their opening prices.
Earlier this week, China released data pointing This suggests that growth in demand for oil, the world’s largest importer, may slow.
Separately, financial market regulators in California seized First Republic Bank and placed its assets under FDIC custody before selling them to JP Morgan. The bank failure was his third major failure in just two months. The collapse was caused by a decline in depositor confidence that caused a massive deposit outflow.
These events have contributed to a crisis of consumer confidence in the US banking system, despite repeated assurances by government officials that the system is stable.
Expectations that the Federal Reserve will raise interest rates again later this week have also not helped the outlook for oil. Although the rate hike is expected to be smaller than previous ones, at 25 basis points, the fact that more rate hikes are needed will have a negative impact on the state of the US economy and thus oil demand.
At the same time, prices continue to receive some support from lower OPEC+ production and expectations of a further drawdown in US oil inventories last week. If so, it will be three consecutive weekly draws.
The American Petroleum Institute will report weekly inventory data later today, followed by the Energy Information Administration tomorrow.
China’s travel data also remain strong, suggesting oil demand is healthier than it was a year ago despite reduced manufacturing activity.
By Irina Slav for Oilprice.com
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