ANKARA – Oil prices fell on Monday ahead of the United States (US) Federal Reserve meeting over demand fears as Fed policymakers are set to decide whether to continue raising interest rates to curb inflation or pause amid the market turbulence brought on by recent bank failures.
International benchmark Brent crude traded at $70.62 per barrel at 10:05 a.m. local time (0705GMT), a 3.22 percent decrease from the closing price of $72.97 a barrel in the previous trading session.
At the same time, American benchmark West Texas Intermediate (WTI) traded at $64.81 per barrel, a 3.16 percent fall after the previous session closed at $66.93 a barrel.
Both benchmarks have lost around 10 percent last week over fears of a global economic recession and low demand caused by the financial crisis in the US after the collapse of Silicon Valley Bank and Signature Bank.
In its toughest monetary tightening in decades, which included four consecutive rate increases of 75 basis points, the US central bank made a total of 425-point rate hikes on seven occasions last year to fight record-high inflation that climbed to its highest level in over 40 years by middle of 2022.
Posting their 15-month lows last week, oil prices extended their losses on Monday as investors are awaiting the next moves of the US Fed after the collapse of Silicon Valley Bank and the resulting fallout.
Although fears of economic recession dominated the market last week after consecutive failures in the US and European Union banking sector, concerns were eased after it is announced that Credit Suisse, the major Swiss bank in deep trouble, will finally be taken over by its Swiss rival UBS.
In an effort to reduce any risks to UBS, the federal government is also awarding UBS a 9 billion Swiss franc ($9.79 billion) guarantee to cover potential losses on certain assets UBS assumes as part of the deal, should any future losses exceed a certain threshold.
In the US, a subsidiary of New York Community Bancorp reached an agreement with US regulators to purchase deposits and loans from Signature Bank, the Federal Deposit Insurance Corporation (FDIC) announced Sunday.
In an e-mail note, Daniel Hynes, commodity strategist at Australia and New Zealand Banking Group, said "several key technical measures suggest the sharp fall in oil prices appears to be overdone."
Hynes underlined that low WTI prices could also be an opportune time for the US to refill its strategic reserve.
"At 371.6 million barrels, it’s at its lowest level since the 1980s. The White House administration has previously said it won’t start refilling it until prices fall below USD70/bbl, a level WTI closed below last week," he said. (Anadolu)