Oil prices see renewed slump as European bank worries rise

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Oil futures slumped Friday, taking back a chunk of this week’s bounce, as renewed worries over the U.S. and European banking sectors revived fears of a credit squeeze and an economic downturn.

Price action
  • West Texas Intermediate crude for May delivery
    CL00,
    -3.47%

    CL.1,
    -3.47%

    CLK23,
    -3.47%

    fell $2.89, or 4.1%, to $67.07 a barrel on the New York Mercantile Exchange.

  • May Brent crude
    BRN00,
    -3.21%

    BRNK23,
    -3.20%
    ,
    the global benchmark, dropped $2.88, or 3.8%, to $72.62 a barrel on ICE Futures Europe.

  • Back on Nymex, April gasoline
    RBJ23,
    -1.81%

    declined 2.5% to$2.541 a gallon, while April heating oil
    HOJ23,
    -0.28%

    rose 1.9% to $2.524 a gallon.

  • April natural gas
    NGJ23,
    +3.53%

    was up 1.9% at $2.196 per million British thermal units.

Market drivers

Crude was falling alongside equities. U.S. and European bank worries were back in the spotlight as Deutsche Bank 
DB,
-6.13%

 
DBK,
-14.42%

shares dropped 8% in European trade and shares of UBS AG
UBS,
-6.03%


UBSG,
-6.09%
,
 which has agreed to buy Credit Suisse, fell 6%.

Crude prices fell sharply last week, trading at 15-month lows, as concerns rose over the health of the banking sector following the collapse earlier this month of California’s Silicon Valley Bank.

“Oil prices, which had become caught up in the downward pull of the market turmoil to a considerable extent, were able to recover for a short time, though at $77 Brent still remained 10% cheaper than it was at the start of the year,” said Barbara Lambrecht, commodity analyst at Commerzbank, in a note. “This is attributable on the one hand to the still elevated risk aversion and on the other to the surprisingly high supply.”

Lambrecht said any further brightening of sentiment in China’s manufacturing sector could boost economic optimism. On the supply side, traders are focused largely on Russia, she wrote, where the production cut of 500,000 barrels a day that was announced for March is likely to be confirmed by initial data, “though the production level could turn out to be higher than anticipated nonetheless.”

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