NEW YORK: Oil prices fell in volatile trading on Monday as the collapse of Silicon Valley Bank hit equities markets and raised fears of a fresh financial crisis, but a recovery in Chinese demand provided support.
Brent crude futures were down 76 cents, or 0.9%, to $82.02 per barrel by 11:51 a.m. EDT (1551 GMT). The global benchmark earlier fell to a session low of $78.34, its lowest since early January.
US West Texas Intermediate crude futures (WTI) fell 75 cents, or 1%, to $75.93 a barrel. WTI earlier dropped to $72.30 a barrel, its lowest since December.
Fears of contagion from the failure of Silicon Valley Bank led to a sell-off in US assets at the end of last week, while state regulators closed New York-based Signature Bank on Sunday.
US stock indexes were mixed in choppy trading as investors weighed a possible pause in interest rate hikes by the Federal Reserve in March. US authorities launched emergency measures on Sunday to shore up confidence in the banking system.
The sudden shutdown of SVB Financial triggered concerns about risks to other banks from sharp rate hikes by the Fed over the last year, but has also spurred speculation about whether the central bank could slow the pace of its monetary tightening.
Oil prices whipsawed on Monday as investors considered market effects from the news.
“It was kind of surprising today to see the big drop in oil considering the fact that the Fed more than likely will have a harder time raising interest rates aggressively and that should cause weakness in the dollar,” said Price Group analyst Phil Flynn.
A weaker greenback makes oil cheaper for holders of other currencies and typically supports oil prices.
Worries about further monetary tightening by the Federal Reserve have been exacerbated by high US crude oil inventories.
Oil’s fall follows positive momentum on Friday, when US employment data surprised to the upside. Data for February beat expectations, with nonfarm payrolls rising by 311,000, compared with expectations of a gain of 205,000 in a Reuters survey.