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Oil Prices Hit 2-Month Low After Moody's Downgrade of US Banking Sector

© AP Photo / Sue OgrockiA pump jack is silhouetted against the setting sun in Oklahoma City on March 22, 2012.
A pump jack is silhouetted against the setting sun in Oklahoma City on March 22, 2012.  - Sputnik International, 1920, 15.03.2023
NEW YORK (Sputnik) - Oil prices hit a two-month low Tuesday after the collapse of one of America’s top 20 banks led ratings agency Moody's to downgrade the country’s banking sector, a move analysts said could negatively impact the economy and its demand for energy.
New York-traded West Texas Intermediate, or WTI, crude oil settled down $3.47, or 4.7%, at $71.33 per barrel, after hitting a two-month low at $70.94. Together with Monday's 2.4% drop in WTI, the US crude benchmark has lost more than 7% since the start of this week.
London-traded Brent crude settled down $3.32, or 4.1%, at $77.45. Like WTI, Brent hit a two-month low earlier in the session, touching $77.05. The global crude benchmark has lost almost 7% since the start of the week, after accounting for the 2.4% slide in the previous sessions.
Crude prices have tumbled since Monday in the wake of last week’s collapse of Silicon Valley Bank, which prompted the Federal Deposit Insurance Corp to seize control of the California-based lender and at least one other bank to prevent contagion.
The Biden administration has assured depositors in US banks that their money is safe and that there will be no repeat of the 2008 financial crisis. The Federal Reserve said it is conducting a thorough review to help plug holes in the banking system.
Moody's  - Sputnik International, 1920, 14.03.2023
Moody's Downgrades Outlook on US Banking System to Negative
Despite this, Moody’s issued a downgrade of the banking sector, citing a “rapidly deteriorating operating environment” that it said carried risks associated with the Fed’s plan to continue hiking interest rates. The central bank has added 450 basis points to rates over the past year to control headline inflation, which the Consumer Price Index report on Tuesday showed grew 6% during the year to February — three times above the Fed’s annual target of 2%.
What’s surprising to some analysts was oil’s continued tumble on the so-called SVB crisis despite Wall Street’s three major stock indices — the Dow Jones Industrial Average, S&P 500 and Nasdaq — all rebounding from Monday’s slide.
“Oil prices are continuing to whipsaw while remaining within the broad ranges they've traded within since early December,” Craig Erlam, analyst at online trading platform OANDA, said in his daily market note on energy.
“Yesterday we saw Brent and WTI testing the lower end of these in response to the turmoil that erupted in the financial system that triggered widespread risk aversion. Today we're seeing them trade lower again, albeit still higher than yesterday's lows.”
Erlam said without a strong rebound in crude prices, oil traders might fear more losses ahead, resulting in a further price slide. “A break below the lows looks a much greater risk which may keep pressure on in the short term,” he added.
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