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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil Prices Begin To Bounce Back Following Dramatic Drop

  • Oil prices were trending higher early on Thursday morning, sparking hopes of a possible rebound follow three days of significant losses.
  • Goldman Sachs helped to spark the upward momentum by boosting its outlook for China’s annual economic growth.
  • News that the Swiss central bank would lend up to $54 billion to Credit Suisse helped to ease fears of a banking collapse, adding to upward momentum.
Oil Prices

Crude oil prices were on the rise Thursday after booking substantial losses earlier in the week following two bank collapses in the United States that ignited fears of an industry meltdown.

The rebound in early Thursday trade followed an update on China’s growth outlook from Goldman Sachs, which reinforced expectations of stronger oil demand this year.

The update follows more upbeat forecasts for demand, from OPEC and the International Energy Agency, which went as far as to say it expected global oil demand to hit a record high this year, at 102 million barrels daily.

OPEC, for its part, said oil demand this year will rise by 2.32 million barrels daily with China accounting for a large portion of it. Yet the oil-producing group noted rising interest rates as cause for concern with regard to global economic growth.

"China's reopening, following the lifting of the strict zero-COVID-19 policy, will add considerable momentum to global economic growth," OPEC said in its latest Monthly Oil Market Report.

"The rapid rises in interest rates and global debt levels could cause significant negative spill-over effects, and may negatively impact the global growth dynamic."

The latest news that provided some support to prices was the news that the Swiss central bank will lend up to $54 billion to troubled Credit Suisse to prop up its liquidity. The possibility of a bank collapse of such proportions would have been devastating for the industry and for oil prices.

Yet the price recovery has been shaky amid heightened uncertainty about the world’s banking sector.

"Market sentiment deteriorated as the banking crisis expanded to Europe from the U.S. The future trend will depend on the level of market angst even if fundamentals are not necessarily showing much in the way of bearish signs," one analyst from Haitong Futures told Reuters earlier today.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on March 16 2023 said:
    Every single financial crisis from the 1929 Great Depression to the 2008 subprime financial crisis and the 2014 oil price collapse started in the United States and then spread to the world. The collapse of Silicon Valley Bank (SVB) and another regional bank is no exception.

    The reason could be inherent structural weaknesses in both the US economy and its banking system and abuse of the dollar. Alternatively, the collapse of the two US regional banks could have been triggered by extreme hiking of interest rates by the Federal Reserve, a case of ‘the cure being worse than the disease.’

    Credit Suisse Bank whose shares plunged yesterday has now stabilized with a $54 bn-injection from the Swiss Central Bank. Moreover, OPEC+’s projection that global oil market will grow this year by 2.32 million barrels a day (mbd) with China accounted for 50% of the growth or 1.16 mbd has led to oil prices starting to trend upwards.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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