Petroleum Prices Hit the Lowest Level in the Past 15 Months
The chaos that occurred last week in the U.S. banking sector, and the concerns that these effects would also impact the elderly continent, continue to negatively affect financial markets. The failure of SVB, the 16th largest bank in the United States, has caused panic in European banks. The loss of value in the seven largest banks in Europe has reached nearly 20% since last week. Particularly, the value losses in Credit Suisse, which has been talked about for its capital adequacy in recent months, have come to the fore. Credit Suisse's shares began to plummet after the President of the National Saudi Bank, speaking to journalists during a break at a conference in Saudi Arabia, said they had refused to provide further capital support to Credit Suisse. The CDS risk premium rose to levels seen during the 2008 crisis. While volatility increased in almost all instruments as a result of evaluating the negative impact of the turbulence in financial markets on the demand outlook, the VIX fear index rose above the 28 level. Energy commodities also suffered from the chaos, causing petroleum prices to fall to the lowest level in the past 15 months.
Will Petroleum Prices Continue to Decline?
Looking at the developments in the energy commodities, yesterday, data on crude oil inventories, which closely concern the demand outlook, were announced. Crude oil inventories exceeded expectations, rising by 1.5 million barrels compared to the previous week. Despite the economic data coming from China indicating recovery, the International Energy Agency's (IEA) report included expressions that Russia disrupted the supply-demand balance in the market by increasing oil production. In addition to all these developments, American crude oil (WTI) futures fell to levels of $65 as concerns about Credit Suisse also intensified.
Petroleum prices, which have been fluctuating in a narrow range for some time due to the aggressive quantitative tightening cycle of the FED and the optimism created by the opening of China, had predicted a moderate surplus for the second quarter of 2023 before the summer months, during which petroleum demand was quite strong, began. Recent developments in global markets indicate that petroleum prices may continue to remain under pressure. It can be expected that the quantity of supply will determine petroleum prices in the short and medium term, while the quantity of demand will determine it in the long term. An excess supply that may occur in the energy market may limit the short-term price hikes.
From a technical perspective, while American crude oil (WTI) has fallen to its lowest level since December 2021, it is testing its strong main support level, which passes through the $68.30 level. This level also corresponds to the 50% Fibonacci correction level of the rising trend that began in April 2020. The downward break of this level will pave the way to the next major support level at $53.40. In a scenario indicating that the demand outlook in the energy market is positive and indicating a squeeze on the supply side in the short term, the 50-day moving average line, which passes through the $77 level, may act as a resistance in upward movements.
