SVB fallout spreads through energy markets, OilPrice said.
The 50-day implied volatility rate of oil jumped some 16% amidst the ongoing chaos surrounding the collapse of SVB and Signature Bank. With U.S. headline CPI coming in at 6% in February, the balancing act of the Federal Reserve might render the oil markets more volatile again as higher inflation for longer undermines demand growth but also cuts into supply prospects.
In just one day of trading, the open interest held in ICE Brent contracts decreased by almost 35,000 lots (equivalent to 35 million barrels) whilst the response in WTI NYMEX was much more subdued. As both WTI and Brent shed almost $5 per barrel week-on-week, it is the Middle Eastern benchmark Dubai that has come out of the chaos relatively unscathed, being already on par with Brent and showing the resilience of Asian markets.
The collapse of Silicon Valley Bank and the risks of seeing other U.S. banks going down the drain have shaken the oil markets, sending WTI below $75 per barrel and Brent below the $80 per barrel mark. The oil narrative has been almost completely taken over by macro news, as even the relatively few newsworthy stories did not provide any surprises – OPEC oil demand growth is still 2.3 million b/d and U.S. oil inventories seem to be relatively stagnant.