The biggest US bank failure since 2008 continued to reverberate through financial markets as oil prices extended losses ahead of important inflation data. After a turbulent session on Monday and a 2.5% decline in the closing price, West Texas Intermediate fell under $75 a barrel. Investors will be watching the consumer price index reading, which is scheduled for release later on Tuesday, for guidance on the direction of monetary tightening, though odds are growing that the Federal Reserve won’t raise interest rates next week as a result of the fallout from Silicon Valley Bank’s failure.
Brent’s nearby put skew, which measures how much more traders are ready to pay for options that profit from a price decrease rather than a rally, increased to its highest level since mid-August on Monday amid the market turbulence.
According to Warren Patterson, head of commodities strategy for ING Groep NV, oil has been unable to avoid the fallout from the collapse of SVB. “With US CPI figures, there is still a lot of room for short-term volatility.” Crude has had a difficult year as traders balance worries about a slowdown in the global economy with hope for a recovery in Chinese demand after the country halted Covid Zero. On Monday, a gauge of WTI volatility soared.
OPEC is due to release its monthly market report later on Tuesday, and the International Energy Agency will release its report the following day, on Wednesday, giving a brief overview of the supply and demand landscape.