Oil prices extended their losses on Wednesday to their lowest levels since March, after the world's biggest benchmarks plummeted 5 per cent a day earlier as a regional banking crisis in the US rattled markets and raised concerns about a recession and lower crude demand.
Brent, the benchmark for two thirds of the world’s oil, settled 4 per cent lower at $72.33 a barrel at market close on Wednesday. West Texas Intermediate, the gauge that tracks US crude, closed down 4.3 per cent at $68.60 a barrel.
Brent settled 5 per cent lower at $75.32 while WTI fell by 5.3 per cent to $71.66 at market close on Tuesday.
The world's biggest benchmarks posted two consecutive weekly declines before this week as a crisis at regional banks in the US led to the collapse of First Republic Bank, the second-largest failure in US history since the 2008 global financial crisis when Washington Mutual imploded.
“It got ugly a lot faster than any oil trader expected … oil is in the danger zone as the banking crisis is crippling the short-term outlook for the economy and driving fears that we could be recession-bound a lot faster,” said Edward Moya, a senior market analyst at Oanda.
“Oil, basically, has weakening prospects from the world’s two largest economies, China and the US, and if the macro backdrop deteriorates, momentum selling could easily send prices below the $70 level.”
The US has had three other failures this year that include Silicon Valley Bank, Signature Bank and cryptocurrency-focused lender Silvergate Capital.
The financial turmoil has raised concerns about credit conditions in the US, which are expected to deteriorate for consumers and businesses over the coming six months to their worst level since the Covid-19 pandemic, a survey of chief economists at 15 of America's biggest banks showed last month.
The American Bankers Association said its Credit Conditions Index fell to 5.8 in the second quarter, from 12.5 in the first quarter. A reading below 50 indicates that the economists forecast weaker credit conditions in the coming six months.
Mixed economic data from the US and China, the world's two largest economies, has also added to the uncertainty about the outlook for oil, dragging prices lower.
China is the world’s top importer of crude, and the decline in oil prices also partly reflects disappointment over survey data pointing to the contraction in Chinese manufacturing activity since December, UBS said in a research note.
In an interview with Bloomberg TV on Wednesday, Amrita Sen the co-founder and director of research at Energy Aspects, said concerns over a slowdown in China are "overblown" and that the productions cuts of Opec+ announced last month need time to materialise.
The US Federal Reserve raised interest rates by 25 basis points on Wednesday, its tenth increase since March 2022 as it aims to bring inflation down to its 2 per cent target rate and restore price stability after consumer prices hit a 40-year high of 9.1 per cent in June last year.
The interest rate increase is expected to put further downward pressure on crude prices and is raising concerns that further monetary tightening will push the US economy into a recession and dent demand.
The "bump raise in the rate has been a factor in the oil price retreat in the past week, as the market has priced in a stronger dollar and downside pressure on oil”, said Rystad Energy senior analyst Louise Dickson.
“The excess money supply in the US market still holds some upside potential for oil prices but any signal of a 'higher for longer' outlook from the Fed on interest rates holds further downside risk for oil prices in the short term.”
The Fed continues to face a delicate balancing act, as it considers the reverberations of further tightening to fight inflation against the backdrop of the turmoil in financial markets.
While inflation in the world's largest economy has come down, it remains high, with the annual Consumer Price Index for March slowing to an annual 5 per cent from 6 per cent in February, well above the Fed's 2 per cent target rate.
Some critics have blamed the Fed for acting too slow and playing catch-up with inflation, which was initially considered transitionary.
Others have attacked the US central bank for its subsequent aggressive pivot in which it raised interest rates by a series of 75 basis point and 50 bps increases, stoking fears and criticism that overtightening may increase the risk of a recession.
The Fed needs to increase unemployment in the US economy and reduce money supply to reduce inflation. While thousands of jobs have been shed, the labour market remains tight.
“There is still a significant amount of excess money supply in the US economy that needs to be fully absorbed in goods and services, which means that prices will still be pushed higher and that the Fed’s medicine may need to be administered at a higher dose for a longer duration,” said Ms Dickson.
The US economy slowed to an annual 1.1 per cent in the first quarter of this year after expanding by an annual 2.6 per cent in the previous quarter.
“Stability of the banking system is a primary duty of any central bank. By raising interest rates, the Fed would risk putting the commercial banking sector under further strain, with the potential of more regional banks collapsing,” Ms Dickson said.
Curbing inflation and the appreciation of the US dollar over the past year puts downside pressure on oil prices as crude becomes more expensive for importing countries with weaker currencies than the dollar.
Ms Dickson said while the focus now is on the US dollar and Fed policy, “a bigger monetary risk lurks in mainland China, which could decide to ‘loosen’ its money supply by deflating its currency in a bid to stimulate its export-driven economy, which could prove deflationary overall for global economic growth”.
UAE currency: the story behind the money in your pockets
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
NYBL PROFILE
Company name: Nybl
Date started: November 2018
Founder: Noor Alnahhas, Michael LeTan, Hafsa Yazdni, Sufyaan Abdul Haseeb, Waleed Rifaat, Mohammed Shono
Based: Dubai, UAE
Sector: Software Technology / Artificial Intelligence
Initial investment: $500,000
Funding round: Series B (raising $5m)
Partners/Incubators: Dubai Future Accelerators Cohort 4, Dubai Future Accelerators Cohort 6, AI Venture Labs Cohort 1, Microsoft Scale-up
The Baghdad Clock
Shahad Al Rawi, Oneworld
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Tips to avoid getting scammed
1) Beware of cheques presented late on Thursday
2) Visit an RTA centre to change registration only after receiving payment
3) Be aware of people asking to test drive the car alone
4) Try not to close the sale at night
5) Don't be rushed into a sale
6) Call 901 if you see any suspicious behaviour
The Travel Diaries of Albert Einstein The Far East, Palestine, and Spain, 1922 – 1923
Editor Ze’ev Rosenkranz
Princeton
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
UAE currency: the story behind the money in your pockets
Fixtures
Opening day Premier League fixtures for August 9-11
August 9
Liverpool v Norwich 11pm
August 10
West Ham v Man City 3.30pm
Bournemouth v Sheffield Utd 6pm
Burnley v Southampton 6pm
C Palace v Everton 6pm
Leicester v Wolves 6pm
Watford v Brighton 6pm
Tottenham v Aston Villa 8.30pm
August 11
Newcastle v Arsenal 5pm
Man United v Chelsea 7.30pm
THE%C2%A0SPECS
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THREE
%3Cp%3EDirector%3A%20Nayla%20Al%20Khaja%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Jefferson%20Hall%2C%20Faten%20Ahmed%2C%20Noura%20Alabed%2C%20Saud%20Alzarooni%3C%2Fp%3E%0A%3Cp%3ERating%3A%203.5%2F5%3C%2Fp%3E%0A
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
What are NFTs?
Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.
You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”
However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.
This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”
This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.
Killing of Qassem Suleimani
Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
The BIO
Favourite piece of music: Verdi’s Requiem. It’s awe-inspiring.
Biggest inspiration: My father, as I grew up in a house where music was constantly played on a wind-up gramophone. I had amazing music teachers in primary and secondary school who inspired me to take my music further. They encouraged me to take up music as a profession and I follow in their footsteps, encouraging others to do the same.
Favourite book: Ian McEwan’s Atonement – the ending alone knocked me for six.
Favourite holiday destination: Italy - music and opera is so much part of the life there. I love it.
Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
What are the GCSE grade equivalents?
- Grade 9 = above an A*
- Grade 8 = between grades A* and A
- Grade 7 = grade A
- Grade 6 = just above a grade B
- Grade 5 = between grades B and C
- Grade 4 = grade C
- Grade 3 = between grades D and E
- Grade 2 = between grades E and F
- Grade 1 = between grades F and G
