Crude oil prices plunged below US$70 and Canadian energy stocks took a beating Wednesday as market chaos continued amid concerns about a spreading bank crisis.
“We're down US$12 in two and a half days, which is obviously a very, very, very large move in crude oil,” said Rory Johnston, a Toronto-based energy analyst and founder of the Commodity Context newsletter.
On Wednesday, as shares in Zurich-based Credit Suisse tanked after the bank reported it had identified “material weaknesses” in the firm's internal controls on financial reporting, concerns about a potential global economic slowdown hit crude oil particularly hard. Johnston said for much of this year, the global oil price benchmark Brent crude had been trading in the US$78-88 range. With the reopening of the Chinese economy in the wake of COVID-19 restrictions signalling a potential uptick in demand, market sentiment on future oil demand had been generally bullish with spec positioning in crude oil contracts rising steadily over the last two months.
“Credit Suisse is a bank that matters and contagion risks won't be easing anytime soon, the U.S. consumer is weakening, and China's outlook is not looking so robust after unemployment rose and on worries over the real estate market,” Moya wrote in a research note.
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