Rising global uncertainty concerning the rout in the banking system following the collapse of three major global banks has plunged oil prices to 15 months low on Monday as energy traders are worried that the U.S. central bank might raise interest rates even higher this week.
Brent crude oil, against which Nigerian oil is priced, declined by 3.2% to $70.65 a barrel to settle at its lowest level since December 2021 in the early hours of Monday. While the U.S. West Texas Intermediate crude oil stood at $64.59 per barrel, down by 3.2%.
The decline in global energy market on Monday was despite UBS, Switzerland’s largest bank announcing it was acquiring troubled Credit Suisse, the country’s second-largest lender for $3 billion to prevent a banking crisis from spreading into other key sectors.
“The market focus is on current banking sector volatility and the potential for further rate hikes by the Fed,” said Baden Moore, National Australia Bank’s head of commodity research.
While the US Federal Reserve is expected to raise interest rates by 25 basis points on March 22, some executives are calling on the central bank to pause its monetary policy tightening for now but be ready to resume raising rates later.
The upcoming OPEC meeting is also another potential catalyst for the market outlook. “Further downside risk to prices increases the probability OPEC reduces production further to support prices,” Moore added, referring to the Organization of the Petroleum Exporting Countries.
Meanwhile, Goldman Sachs has cut its forecasts for Brent crude oil after prices plunged on banking and recession fears. The leading investment bank now expects brent oil to average $94 in the next 12 months and $97 in 2024, this is about $4 to $6 from $100 previously predicted.
Despite the uncertainty in the market, some analysts predict that prices will trend higher over the course of the year.
