After a 5% dip the previous day, oil prices rebounded on Thursday, settling up approximately 1%, primarily due to assurances by Saudi Arabia and Russia on production cuts and the safety of the U.S. banking system. This helped restore some confidence across battered risk markets, with the New York-traded West Texas Intermediate (WTI) settling up 74 cents, or 1.1%, at $68.35 a barrel, although the U.S. crude benchmark earlier fell to $65.75, resting just a dime above Wednesday’s 15-month low of $65.65.
The global crude benchmark, London-traded Brent, settled up $1.01, or 1.4%, at $74.70, after plumbing a low of $71.92 earlier in the day, slightly above the previous session’s trough of $71.67. Technical charts suggest that WTI, which fell below $70 a barrel for the first time since December 2021 on Wednesday, remains vulnerable to a deeper downside. Sunil Kumar Dixit, chief technical strategist at SKCharting.com, stated that “There is still resistance for it to get back to $70,” adding that “we have to take into cognizance that WTI dropped to $65.70 twice today, and while it attempted to move away from the lows by climbing more than $1 at one point, there was no firm support on the top end of the $60s.”
On the banking front, Thursday’s rebound in risk assets came after a consortium of U.S. banks led by JPMorgan Chase, the country’s largest bank, led rescue efforts for First Republic Bank, the latest lender in trouble. The U.S. Treasury Secretary, Janet Yellen, urged depositors to have confidence in the U.S. financial system, stating that “Our judgment is [that] this banking system overall is safe and sound,” in testimony before the Senate.
Crude prices suffered their worst drop for 2023 on Wednesday as a U.S. banking crisis that began with the collapse of Silicon Valley Bank and Signature Bank last week extended towards Europe, with financial troubles at Zurich-based Credit Suisse, one of the world’s preeminent names in global investment banking. The Federal Deposit Insurance Corp quickly took charge of the U.S. banks that collapsed last week, before JPMorgan and the rest of the industry stepped in on Thursday to help out First Republic. All of the troubled banks experienced deposit runs, or customers pulling out money.
On the oil front particularly, crude prices benefited from signals given by Saudi Arabia and Russia that they would support the market with production cuts. A day after the worst selloff in crude for this year, Saudi state media reported that Saudi Energy Minister Abdulaziz bin Salman and Russian Deputy Prime Minister Alexander Novak met in the Saudi capital to discuss the OPEC+ group’s efforts to maintain market balance. At the meeting, the two officials reaffirmed their support for the daily cut of 2 million barrels decided in October by the 13-member Saudi-led Organization of the Organization of the Petroleum Exporting Countries and its 10 allies steered by Russia.
Oil prices rebounded after assurances from Saudi Arabia and Russia on production cuts and the safety of the U.S. banking system. While technical charts suggest that WTI remains vulnerable to a deeper downside, the signals of support from key producers are positive. Meanwhile, JPMorgan and other U.S. banks have stepped in to help troubled lenders, reassuring depositors that the overall banking system is safe and sound.
