Upward pressure:

OPEC has maintained its demand forecast for 2023 in the latest oil market report. It still forecasts global oil demand to increase by 2.3 million b/d this year to 101.9 million b/d. It has revised non-OECD demand growth – led by China – upwards by 100,000 b/d from February, to 2.1 million b/d.

Some oil market experts believe that Silicon Valley Bank’s (SVB) collapse could force the US Federal Reserve (Fed) to intervene and pause its aggressive interest rate hikes to stimulate economic growth.

Downward pressure:

The shock of SVB’s collapse has cascaded into oil markets, where investors have reduced their exposure to riskier assets. This has compounded the downward pressure on Brent.

“Crude oil remained under pressure as concerns of weaker economic activity sparked by SVB’s failure reverberated through the market,” said Daniel Hynes, commodity strategist at ANZ.

SVB collapse is analogous to a “Pandora’s Box opening” for interest-rate-sensitive commodities, says SPI Asset Management’s managing partner Stephen Innes. “Oil markets are looking straight into that recession tunnel as energy traders draw a straight line to prior bank sector-driven recessions, especially the 2008 financial crisis, which has similar overtones to the current financial tumult and when oil tanked,” Innes has explained. A recession in OECD countries could push Brent price below $60/bbl, he has warned.

Crude production in the core OPEC group averaged 28.92 million b/d in February – an increase of 117,000 b/d on the month. OPEC’s preliminary estimate of Russia’s crude production in February showed “stable” monthly output at an average of 9.8 million b/d.
Source: Engine Technologies