By Peter Nurse
Investing.com -- Oil prices weakened Friday, heading towards steep weekly losses on concerns that the ongoing banking crisis will have a negative impact on the wider economy.
By 09:45 ET (13:45 GMT), U.S. crude futures traded 2.1% lower at $66.90 a barrel, while the Brent contract fell 2.1% to $73.11 a barrel. Both benchmarks are down over 11% this week, the largest weekly loss this year.
First Republic Bank's (NYSE:FRC) stock was under pressure again in premarket trading on Friday, falling over 20%, despite receiving $30 billion from a group of major U.S. banks, while SVB Financial Group (NASDAQ:SIVB), the parent company of Silicon Valley Bank, has filed for Chapter 11 bankruptcy, a week after federal regulators were forced to rescue the bank with emergency measures.
In Europe, Credit Suisse (SIX:CSGN) stock slumped Friday, putting the lender on course for its worst weekly drop in three years, as investors questioned its future despite the Swiss National Bank (SIX:SNBN) offering a liquidity lifeline.
This banking sector turmoil has forced market participants to take a more conservative view of likely demand growth this year.
This comes despite the Organization for Economic Cooperation and Development stating Friday that the global economic outlook has improved from a few months ago.
The Paris-based organization raised its forecast for global growth to 2.6% this year from 2.2% in its last publication in November, citing a decline in energy and food prices and China's easing of its anti-COVID restrictions.
"Broader market concerns related to the banking sector have weighed on risk assets, while oil is also seeing some soft fundamentals at the moment," said analysts at ING, in a note.
The International Energy Agency increased its Russian supply estimate by 300 million barrels a day, in its latest monthly oil market report, stating that Russian exports have held up better than expected.
Additionally, "the current surplus environment has also meant that [U.S.] inventories have reached an 18-month high and the market is expected to remain in surplus over 1H23," ING added.
The Baker Hughes rig count is due later in the session and may draw more attention than usual later after the U.S. government predicted that shale oil output is likely to top out in the spring.
The CFTC's positioning data, meanwhile, are likely to reflect the liquidation of speculative long positions over the last week.