On Tuesday, March 14, 2023, oil prices plummeted by more than $2 a barrel, with Brent crude futures falling by $1.11 or 1.3% to $79.66 a barrel, while US West Texas Intermediate crude futures (WTI) fell by $1.24 or 1.6% to $73.56 a barrel. This sharp drop was caused by the collapse of Silicon Valley Bank, which has raised fears of a new financial crisis.
The bank’s collapse has sent shockwaves through the financial markets, and many investors are worried that this could be the start of another global financial meltdown. This has led to a significant sell-off in the oil markets as investors look to reduce their exposure to riskier assets.
The oil markets are susceptible to financial crises closely tied to the global economy’s health. When investors are worried about the financial system’s stability, they tend to reduce their investments in oil, as they perceive it to be a riskier asset.
In addition to the collapse of Silicon Valley Bank, other factors are contributing to the current drop in oil prices. One primary driver is the increasing oil supply from countries like the United States, Russia, and Saudi Arabia. This increased supply has put downward pressure on prices as the market struggles to absorb the new oil.
Another factor contributing to the drop in prices is the weakening demand for oil in some parts of the world. With the global economy still struggling to recover from the COVID-19 pandemic, many countries are still experiencing sluggish economic growth, which has reduced oil demand.
Despite the recent drop in prices, many analysts still believe that oil prices will rebound in the coming months. This is because countries are still struggling with supply disruptions and geopolitical tensions, which could limit the supply of oil supply prices.
The recent drop in oil prices reflects the increasing uncertainty in the global economy. While many factors are at play, the collapse of Silicon Valley Bank has undoubtedly contributed to the current market volatility. As the situation continues to unfold, keeping a close eye on developments in the oil markets will be essential, as they are likely to impact the global economy significantly.
