Crude oil gains on historic Swiss banks deal and support from central banks

Oil prices increased on Monday following their greatest weekly loss in months as UBS agreed to acquire Credit Suisse and some of the biggest central banks in the world worked to reassure and stabilize the world’s financial markets. Following a week in which it lost about 12% of its value, the price of Brent oil futures increased 35 cents, or 0.5%, to $73.32 a barrel.

U.S. West Texas Intermediate crude was up 37 cents, or 0.6%, to $67.11 per barrel, following a 13% decline the previous week, the largest weekly decline since last April. The country’s second-biggest lender Credit Suisse will be acquired by Switzerland’s largest bank, UBS, in a historic transaction, the bank revealed late on Sunday. The U.S. Federal Reserve, European Central Bank, and other significant central banks vowed to improve market liquidity and help other banks in the wake of the decision.

According to CMC Markets analyst Tina Teng, the Swiss bank merger and the efforts made by central banks to replenish the market’s liquidity are reviving investor confidence and causing a rise in risky assets, including the price of petroleum. If the Fed changes its tone on rate hikes, the general market bounce in response to the financial crisis “may continue,” she noted.

Investors are putting in a 60% chance that the Fed will increase interest rates by 25 basis points on Wednesday, but some executives are urging the central bank to temporarily halt its tightening of monetary policy while preparing to do so in the future. The dollar could decline due to a pause in interest rate increases, making goods priced in dollars more accessible to holders of other currencies. Separately, Goldman Sachs lowered its predictions for Brent crude after the price fell due to concerns about the banking sector and the recession.

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