By Barani Krishnan
Investing.com -- The might of China and its COVID crisis couldn’t break oil’s $70 support. It had to take a banking crisis to do it.
U.S. crude’s West Texas Intermediate benchmark fell around 5% for a second day in row, to below $70 per barrel the first time since December 2021 and to an intraday bottom of $67.42, as the banking crisis that began with the collapse of mid-sized Californian lender Silicon Valley Bank now threatens Europe-based Credit Suisse — one of the world’s preeminent names in investment banking.
WTI, as the U.S. crude benchmark is known by its initials, fell about 7% in the previous two sessions, amounting to a loss of some 12% on the week.
U.K.-traded Brent crude was down $3.66, or 4.7%, to $73.79 by 11:07 ET (15:07 GMT) on Wednesday. The global crude benchmark has lost more than 10% since the start of the week.
“All hell’s breaking loose in oil and it has everything to do with the U.S. banking crisis that’s now going global,” said John Kilduff, partner at New York-based energy hedge fund Again Capital. “There is something after all more potent than Chinese demand for oil — liquidity.”
Credit Suisse's (NYSE:CS) share price plunged 28% in the biggest one-day selloff on record, leaving it down more than 75% over the past year, as questions grew about its solvency. The crisis at CS came into greater focus on Wednesday after its biggest shareholder Saudi National Bank responded with an emphatic “absolutely not” when asked if it was open to doing further cash injections into the Zurich-based investment bank.
The path of least resistance for oil is lower for sure, with WTI’s next stop seen at around $66, though the sheer weakness in market sentiment could take it much lower, said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“As long as prices sustain below 5 week EMA of $74.50 on a closing basis, the way for further drop to 200 week SMA of $66.10 is wide open,” Dixit said, referring, respectively, to the Exponential Moving Average and Simple Moving Average.