(Bloomberg) — Oil prices whipsawed on Monday as traders tried to gauge how the biggest US bank collapse since 2008 will affect monetary policy.
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Crude fell more than four dollars earlier in the day as investors fled from risk assets, only to recover most of those losses by around midday. President Joe Biden aimed to strengthen confidence in the banking system and prevent contagion with his morning speech, saying that customers at Silicon Valley Bank and Signature Bank will be protected.
“The risk off trade was driving oil prices down,” said Rob Thummel, a portfolio manager at Tortoise Capital Advisors., “A little bit more certainty on the direction of the banks means the risk off trade is no longer happening as much.”
WTI 2nd month implied volatility rose by more than 3 percentage points, the most since September 2022. Traders are also closely watching the Federal Reserve’s next move, as Goldman Sachs Group Inc. scrapped its call for a Federal Reserve interest-rate hike next week due to the turmoil.
Oil has been tugged back and forth this year by concerns over America’s tightening monetary policy and optimism around China’s economic recovery. Many market watchers are still bullish on the longer-term outlook, with Saudi Aramco forecasting consumption will probably hit a record of 102 million barrels a day by the end of 2023.
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