Crude prices took a hit on Monday, dropping by as much as 4%, before settling down by more than 2%. Despite financial regulators’ reassurance that they have acted to contain the fallout from the collapse of Silicon Valley Bank, one of the country’s top 20 lenders, oil prices tumbled due to concerns over a potential U.S. banking debacle.
The Biden administration has also sought to assure the public that the country will not experience another financial crisis, similar to the one that occurred 15 years ago. However, these assurances were not enough to ease market concerns, leading to the decline in crude prices.
One of the factors contributing to the market anxiety is the upcoming release of America’s most influential indicator on inflation, the Consumer Price Index (CPI), and the potential for a rate hike. The CPI is expected to have expanded 6% year on year in February, a slight decrease from 6.4% in January, while the month-on-month reading is predicted to be 0.4%, down from the previous month’s 0.5%.
Moreover, the core CPI, which excludes volatile food and energy prices, is expected to rise 5.5% for the year to February, compared to the previous annual reading of 5.6%. The month-on-month core reading is anticipated to be flat at 0.4%.
Despite these market concerns, President Joe Biden has assured the public that the government will ensure that the bank deposits of Americans remain safe, and the country does not experience another financial crisis. However, these pledges have not been enough to alleviate the fears of investors.
In terms of the impact on the oil market, New York-traded West Texas Intermediate, or WTI, crude settled down $1.88, or 2.4%, at $74.80 a barrel. It earlier sank 4% to reach $72.33. Its low prior to that was $70.25, reached on Dec. 12.
In conclusion, market concerns over a potential banking debacle in the U.S. have led to a decline in crude prices, despite financial regulators’ assurances and Biden’s pledge to safeguard Americans’ bank deposits. With the release of the CPI data looming, investors are wary of the potential for a rate hike and the impact it may have on the market.