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Oil up again as banking crisis ebbs, potential U.S. inventory draw in focus

Published 03/21/2023, 03:22 PM
Updated 03/21/2023, 03:24 PM
© Reuters.
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By Barani Krishnan

Investing.com -- Crude prices rose a second day in a row on Tuesday as the U.S. banking crisis ebbed, helping turn traders attention towards a potential weekly inventory drop in the world’s largest oil consumer.

New York-traded West Texas Intermediate, or WTI, crude settled up $1.69, or 2.5%, adding to Monday’s 1.4% gain. Just on Monday, WTI fell to as low as $64.38, marking a bottom not seen since December 2021. For the whole of last week, the U.S. crude benchmark fell almost $10 a barrel or 13%.

London-traded Brent crude settled up $1.53, or 2.1%, at $75.32 per barrel, adding to Monday’s rise of 1.1%. The global crude benchmark plumbed a 15-month low of $70.12 on Monday, after finishing last week down 13%.

Crude prices cratered last week on concerns that a U.S.-to-Europe banking crisis could spill over into the broader economy, denting activity and potentially damaging demand for oil. Fears of slowing demand have weighed heavily on oil markets this year, keeping prices largely depressed.

Fears over the liquidity crisis at banks, however, abated since midday Monday as Swiss investment bank UBS (NYSE:UBS) said it will buy beleaguered peer Credit Suisse (NYSE:CS) and JPMorgan (NYSE:JPM) appeared to make progress in the rescue of First Republic Bank (NYSE:FRC), after last week’s federal takeover of regional banks Silicon Valley and Signature. 

A technical rebound has also set into oil and could take WTI higher, back into the $70 territory it was perched at before last week’s tumble, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.

“Oil continues to trade with positive bias as prices test the intraday high of $69.50, slightly above the 5-Day EMA of $68.90,” Dixit said, referring to the Exponential Moving Average. “As long as prices sustain above $68.50, we expect some more up move towards $70.”

Market participants were also on the lookout for U.S. weekly oil inventory data, due after market settlement from API, or the American Petroleum Institute.

The API will release at approximately 16:30 ET (20:30 GMT) a snapshot of closing balances on U.S. crude, gasoline and distillates for the week ended March 17. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.

For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 1.565 million barrels, versus the 1.55M barrel rise reported during the week to March 10.

On the gasoline inventory front, the consensus is for a drop of 1.677M barrels over the 2.061M barrel decline in the previous week. Automotive fuel gasoline is the No. 1 U.S. fuel product.

With distillate stockpiles, the expectation is for a drop of 1.5M barrels versus the prior week’s deficit of 2.537M. Distillates, which are refined into heating oil, diesel for trucks, buses, trains and ships and fuel for jets, have been the strongest component of the U.S. petroleum complex in terms of demand.

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