Oil extended losses on Wednesday with Brent crude hitting a three-month low as unease over Credit Suisse spooked world markets, offsetting hopes of a Chinese oil demand recovery.
Early signs of a return to calm and stability faded after Credit Suisse’s largest investor said it could not provide the Swiss bank with more financial assistance, sending its shares and broader European stocks sliding.
“Fears of contagion are clearly gaining traction,” Tamas Varga of oil broker PVM told Reuters. “As a result, the dollar is stronger and equities are weakening – bad omens for oil.”
U.S. West Texas Intermediate crude (WTI) was down $3.20, or 4.50%, at $68.19 after touching its lowest since December 2021 at $69.32.
Brent crude fell $3.24, or 4.18%, to $74.32 a barrel.Oil had rallied earlier on figures showing that China’s economic activity picked up in the first two months of 2023 after the end of strict COVID-19 containment measures.
On Tuesday both benchmarks shed more than 4% to three-month lows, pressured by fears that the collapse of Silicon Valley Bank (SVB) last week and other U.S. bank failures could spark a financial crisis that would weigh on fuel demand.
Wednesday’s monthly report from the International Energy Agency provided support by flagging an expected boost to oil demand from China, a day after OPEC increased its Chinese demand forecast for 2023.
Investors are now awaiting official U.S. oil inventory data later on Wednesday to see if it confirms the 1.2 million barrel rise in crude stocks reported on Tuesday by the American Petroleum Institute.