Crude oil prices fall to $70/barrel as growing stockpiles add to economy fears  |  Author Geoffrey Smith

Published Mar 15, 2023 07:32AM ET

Updated Mar 15, 2023 08:45AM ET

By Geoffrey Smith -- Crude oil prices fell to their lowest in 15 months on Wednesday, on a combination of lackluster data from China and fears that signs of stress in the financial sector could hurt the global economy in the coming months.

WTI Crude futures fell to an overnight low of $70.03 a barrel after figures showing that Chinese industrial output in the first two months of the year grew only 2.4% from a year earlier, below expectations. That represents an anemic start to what is expected to be a strong year from a sector that has accounted for a large chunk of world oil demand growth in recent years. By 08:30 ET they had recovered to $70.28, down 1.5% on the day. Brent was down 1.6% at $76.25 a barrel.

Prices took another blow after fresh signs of weakness in global banks, following hard on the heels of three bank failures in the U.S. last week. Credit Suisse (SIX:CSGN) shares hit a new all-time low after a report that Saudi National Bank (TADAWUL:1180) has refused to inject any more money into the struggling Swiss lender, after hitting regulatory ceilings on what it can invest there.

Financial sector weakness was the herald of the great recession in 2008-2009, which took oil prices from a high of $148 a barrel to a low of $32 within five months.

To top it all, the International Energy Agency reported that global stockpiles have hit their highest in 18 months as softening demand and a gradual increase in non-OPEC supply have offset the shock of Russia’s invasion of Ukraine a year ago. The IEA said it expects this – along with slower growth in advanced economies - to cushion what will be a sharp tightening of the global spot market later in the year as Chinese demand steps up a gear.

Stockpiles continue to grow in the U.S., with the American Petroleum Institute reporting a 1.1 million barrel increase in crude inventories last week. The government’s data are due at 10:30 ET (14:30 GMT), as usual. The Energy Information Administration had also said on Tuesday that it expects shale oil output in the U.S. to reach its highest since 2019 in April, although the increments in U.S. output are getting smaller, suggesting that the improvement in U.S. supply is close to topping out.

The IEA’s forecasts echoed those of OPEC on Tuesday. OPEC had raised its forecast for Chinese demand growth to 710,000 b/d from 590,000 b/d, but had cut its forecasts for OECD demand by the same amount.

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