Oil rose on Tuesday, extending a recovery from a 15-month low hit the previous day, as the rescue of Credit Suisse eased worries about global banking sector risks that could hit economic growth and reduce fuel demand.
Sentiment across financial markets has improved following UBS’ takeover of Credit Suisse, announced on Sunday, and after major central banks said they would enhance market liquidity and support the banking system.
U.S. West Texas Intermediate (WTI) gained $1.23, or 1.80%, to $68.94.
“Banking jitters may have taken a breather yesterday but remain in play,” said Stephen Brennock of oil broker PVM.
“Although an immediate crisis appears to have been averted there are still fears of another sell-off.”
The next focus for investors is the decision by the U.S. Federal Reserve on whether and by how much to raise interest rates when it concludes its two-day meeting.
Since the banking strife began this month, markets have revised down expectations for the next Fed rate hike to 25 basis points from 50 bps.
The dollar index steadied on Tuesday after hitting a five-week low in the previous session. A stronger dollar makes oil more expensive for holders of other currencies and so can temper demand.
A meeting of ministers from OPEC+, which includes members of the Organization of Petroleum Exporting Countries plus Russia and other allies, is scheduled for April 3. OPEC+ sources told Reuters the drop in prices reflects banking fears, rather than a worsening supply and demand balance.
Hedge fund manager Pierre Andurand voiced a similar view about the price drop on Tuesday, saying it was speculative and not based on fundamentals. He also said oil will hit $140 a barrel by the end of the year.
Also coming into view are the latest U.S. oil inventory reports, which a Reuters survey expects to show lower crude and product inventories. The first report, from the American Petroleum Institute, is due out at 2030 GMT on Tuesday.