Oil prices clawed back some ground on Thursday, recovering from the previous session’s 15-month lows, as markets calmed somewhat after Credit Suisse was thrown a financial lifeline by Swiss regulators.
But market sentiment remained fragile, battered by fears of growing stress on banks worldwide, and both the main crude benchmarks gave up some of Thursday’s early gains.
Brent crude futures were up 54 cents, or 0.7%, at $74.23 a barrel by 1105 GMT. West Texas Intermediate crude futures (WTI) rose 43 cents, or 0.6%, to $68.04.
On Wednesday, the third straight day of declines, U.S. crude fell below $70 a barrel for the first time since Dec. 20, 2021.
Brent has lost nearly 10% since Friday’s close while U.S. crude is down about 11%.
“Oil dropped below $70 a barrel amid fears of a second financial crisis hurting the demand outlook,” said City Index analyst Fiona Cincotta. “Today the market mood has improved after Credit Suisse was thrown a financial lifeline.”
Credit Suisse said on Thursday that it would borrow up to $54 billion from the Swiss central bank to shore up its liquidity and investor confidence after a slump in its shares intensified fears about a global financial crisis. Those fears could crowd out inflation worries when European Central Bank policymakers meet on Thursday, possibly forcing them to ditch plans for a hefty interest rate hike that could slow economic growth and dent oil demand.
A fall in U.S. fuel stocks last week also supported oil prices. While Energy Information Administration data showed that crude inventories rose by 1.6 million barrels, gasoline and distillates stocks fell by a combined 4.6 million barrels.
OPEC‘s rosier outlook for China oil demand was also supportive, said Lim Tai An, analyst at Phillip Nova.
The oil producer group raised its 2023 China demand forecast this week and a monthly report from the International Energy Agency (IEA) on Wednesday flagged an expected boost to oil demand from resumed air travel and China’s economic reopening after abandoning its zero-COVID policy.
But oversupply concerns remain.
The IEA report said that commercial oil stocks in developed OECD countries have hit an 18-month high while Russian oil output in February stayed near levels registered before the war in Ukraine despite sanctions on its seaborne exports.