top of page

Bearish sentiment prevails as central bank liquidity support fails to sway oil prices

Oil prices experienced a decline on Monday, reversing early gains as investors awaited the Federal Reserve meeting and expressed concerns over weakening demand this year, which overshadowed measures taken by major central banks to ease market fears of a looming banking crisis.

Crude markets have experienced their worst weekly loss this year as a result of fears that an economic slowdown will stymie oil demand, leading to a mass liquidation of oil longs over the past week and pushing prices down to 15-month lows.

Brent oil futures fell 0.5% to $72.61 a barrel, while West Texas Intermediate crude futures fell 0.5% to $66.62 a barrel by 23:26 ET (03:26 GMT), with both contracts losing over 10% last week.

According to analysts at ING, broader market concerns weighed heavily on the oil market last week, while weak fundamentals have been unable to prop up the market, leading to fears of an economic slowdown and anticipation of the Fed meeting, which will keep markets volatile this week. ING has also cut its outlook for Brent prices this year to $90 a barrel from $98 a barrel, stating that $100 a barrel was appearing less likely.

Crude prices have been heavily impacted by concerns that a banking rout could spill over into the broader economy, reducing activity and potentially damaging crude demand. Fears of slowing demand have also weighed heavily on oil markets this year, keeping prices largely depressed.

The Fed, European Central Bank, and other major central banks have pledged to increase market liquidity and support the banking sector. However, prices received little support from these measures. This move came after Swiss bank UBS Group AG announced that it will buy beleaguered peer Credit Suisse Group in a “historic deal” facilitated by regulators, aimed at easing concerns over a banking crisis.

The focus now shifts to the results of the Fed’s two-day meeting on Wednesday, where the central bank is expected to hike interest rates by a relatively smaller 25 basis points. Uncertainty over the meeting is expected to spur more volatility in markets.

Apart from these, oil also faces other challenges, such as a consistent build in U.S. inventories pointing to a potential supply glut in the world’s largest oil consumer, while major crude importer China saw a sluggish recovery in oil imports despite the lifting of anti-COVID measures.

However, oil bulls were still holding out hopes for more production cuts by the Organization of Petroleum Exporting Countries and allies (OPEC+), following meetings between Russian and Saudi Arabian ministers last week.

9Bullsfx, the region's best CFD broker. Stay updated on the latest market news, trading insights, and expert guidance by subscribing to our newsletter and following us on social media. Our team of experienced professionals is committed to providing you with the knowledge, resources, and support you need to succeed in the fast-paced world of trading. As a subscriber, you'll receive exclusive access to market analysis, trading strategies, and special offers. Don't miss out on this opportunity to take your trading to the next level. Sign up with 9Bullsfx today and start your journey towards financial success.


bottom of page