Oil increases as short-term banking jitters subside

While the rescue of Credit Suisse allayed concerns about threats to the global banking sector that may hinder economic development and fuel demand, oil prices increased on Tuesday, continuing their rebound from a 15-month low recorded the previous day.

In the aftermath of UBS’ acquisition of Credit Suisse and after major central banks announced they will provide market liquidity and support the banking sector, the atmosphere on financial markets has improved following early concerns on Monday.

By 0910 GMT, Brent crude had risen 52 cents, or 0.7%, to $74.31 a barrel. West Texas Intermediate (WTI) in the United States increased by 52 cents, or 0.8%, to trade at $68.16.

“Banking jitters may have taken a breather yesterday but remain in play,” said Stephen Brennock of oil broker PVM.

“Although an immediate crisis appears to have been averted there are still fears of another sell-off.”

The next focus for investors is the decision by the U.S. Federal Reserve on Wednesday on whether and by how much to raise interest rates when it concludes its two-day meeting.

Since the banking strife began this month, markets have revised down expectations for the next Fed rate hike to 25 basis points from 50 bps.

The dollar index, rose on Tuesday after hitting a five-week low the previous session. A stronger dollar makes oil more expensive for holders of other currencies and so can temper demand.

A meeting of key ministers from OPEC+, which includes OPEC members plus Russia and other allies, is scheduled for April 3. OPEC+ sources told Reuters the drop in prices reflects banking fears, rather than a worsening supply and demand balance.