Oil prices took a dive on Friday, reversing early gains of more than $1 a barrel and falling by more than $3, as banking sector fears set crude on course for its biggest weekly decline in months.
Brent crude futures fell by $2.27, or 3.04%, to $72.43 a barrel by 11:52 a.m. EST (1552 GMT). U.S. West Texas Intermediate crude was down $2.13, or 3.1%, at $66.22.
At their session low, both benchmarks were down more than $3. Brent was on track for its biggest weekly fall since December at more than 10%, with WTI heading toward a loss of more than 11%, its biggest since last April.
“The underlying fundamentals aren’t as terrible as what is being priced in here, but there is concern the oil is not as safe a place as cash or gold,” said John Kilduff, Partner at Again Capital LLC in New York.
Pressure this week followed the collapse of Silicon Valley Bank (SVB) and Signature Bank and trouble at Credit Suisse and First Republic Bank.
Prices recovered some ground on Friday after support measures from the European Central Bank and U.S. lenders but dropped again when SVB Financial Group (SIVB.O) said it had filed for reorganization.
The drop in prices highlights “the continued fragile state of the market”, said Ole Hansen, head of commodity strategy at Saxo Bank.
Analysts still expect constrained global supply to support prices in the foreseeable future.
OPEC+ members attributed this week’s price weakness to financial drivers rather than any supply and demand imbalance, adding that they expected the market to stabilise.
WTI’s fall this week to less than $70 a barrel for the first time since December 2021 could spur the U.S. government to start refilling its Strategic Petroleum Reserve, boosting demand.
And analysts expect China’s demand recovery to add price support, with U.S. crude exports to China in March heading towards their highest in nearly two and a half years.
Saudi Arabia and Russia in a meeting on Thursday affirmed their commitment to OPEC+’s decision last October to cut production targets by two million barrels per day until the end of 2023.