World oil prices fell again in trading last Thursday, and reached the lowest level in the last 16 months. This happened because market sentiment remained fragile despite good news regarding Credit Suisse's financial condition.

 

US crude oil futures fell 1.3% to trade at $66.75 a barrel, while Brent futures fell 1.1% to $72.91 a barrel. Early in trading on Thursday, the market recovered slightly after news emerged that Credit Suisse had secured a $54 billion credit facility from the Swiss National Bank. However, the recovery was short-lived as sentiment remained weak amid concerns that rising interest rates coupled with a banking crisis could lead to a recession later in the year, which would hit oil demand hard. According to a report by Goldman Sachs, the probability of the US economy entering a recession in the next 12 months has increased from 25% to 35%. This is due to pressure on the regional banking sector, as evidenced by the collapse of three small banks last week.


Data released Thursday morning showed that the number of Americans filing new claims for unemployment benefits fell more than expected last week, down 20,000 to 192,000. The Federal Reserve meets next week and could ease its interest rate hike cycle amid the banking turmoil, while its counterpart the European Central Bank decided to press ahead with a 50 basis point hike. This week, U.S. crude oil inventories grew more than expected, fueling concerns about a potential oversupply in the world’s largest crude consumer. What happens next in the market depends largely on what the Organization of the Petroleum Exporting Countries and its allies and the U.S. do to influence global supply. World oil prices fell on Thursday, hitting a 16-month low. This was due to market sentiment remaining uncertain despite good news about Credit Suisse’s financial condition. On the other hand, the banking crisis and rising interest rates have the potential to lead to a recession later in the year, which would hit oil demand hard. In any case, what happens next in the market depends largely on the actions of the Organization of the Petroleum Exporting Countries.



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