Oil prices dipped slightly on Tuesday as the uncertainty surrounding the collapse of Silicon Valley Bank (SVB) continues to weigh on risky assets and fuelled concerns for a fresh financial crisis.
Brent crude oil, against which Nigerian crude oil is priced, dipped by 1% to $79.95 a barrel at 9:50 am Nigerian time while the U.S. West Texas Intermediate crude oil fell 1.1% to $73.98 a barrel.
The collapse of SVB triggered concerns about the risks faced by other financial institutions, especially given the U.S. Federal Reserve’s aggressive interest rate hikes over the last year.
According to a survey conducted by Reuters, economists are now projecting a 25 basis points increase in interest rates ahead of the Federal Reserve meeting scheduled for next week instead of the 50 basis points previously projected.
Also, experts had cut down on their expectations for the consumer price data due to be released later today to a 0.4% increase in the month of February. A result that could reduce the year-on-year inflation to 0.6%, and represents the smallest on record since September 2021.
Analysts at National Australia Bank have predicted that a stronger-than-expected U.S. consumer inflation outcome today would further push down oil prices in the near term.
Another issue confronting the oil industry is the slow growth in China, the world’s second-largest economy. Despite the lifting of COVID-19 restrictions consumer inflation slowed to the lowest rate in a year in February as shoppers remained cautious. This deflationary state and weak demand in China have added to the pressures weighing on oil prices.
While the oil market remains uncertain, energy traders are waiting for the release of U.S. oil inventories by the American Petroleum Institute later today.
