Oil records biggest weekly loss since the start of the pandemic

Oil posted its biggest weekly loss since the early months of the COVID-19 pandemic on Friday as banking turmoil poisoned investor sentiment.

West Texas Intermediate for April delivery fell 2.36 percent to $66.74 a barrel, down 12.96 percent for the week, the biggest drop in nearly three years.

Brent crude for May delivery fell 2.32 percent to US$72.97, with a weekly loss of 11.85 percent.

The bankruptcy of Silicon Valley Bank and the troubles at Credit Suisse Group AG drove investors away from risky assets, with oil options accelerating the sell-off.

“Rough action this week reminded many how quickly the commodity can be decimated by macroeconomic events,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “The commodity broke a significant level of support as the market tries to quantify the economic impact of the banking turmoil.”

Traders had been waiting for a catalyst to break prices out of the relatively narrow trading range that dominated the market as expectations for improving Chinese demand compete with weaker economic prospects in the West.

This week’s banking crisis provided the spark and pushed oil prices to a 15-month low. That plunge led to another: Prices fell so low that 43,000 option contracts totaling more than 40 million barrels of crude came “in the money,” making for a tidy payday for some, while deepening the downturn.

Oil’s next leg could depend on decisions from the US Federal Reserve and OPEC. The Fed will decide next week whether to raise rates again, a move that will affect oil demand.

Meanwhile, OPEC and its allies will meet on April 3 to review the group’s production policies. Several technical measures suggest that the recent plunge has pushed the commodity into oversold territory.

Additional reporting by staff writer