By Ambar Warrick
Investing.com -- Oil prices fell on Monday, reversing early gains as anticipation of a Federal Reserve meeting and concerns over weakening demand this year largely offset measures by major central banks to ease market fears of a looming banking crisis.
Crude markets were nursing their worst weekly loss this year as investors sold heavily on concerns that an economic slowdown this year will stymie oil demand. This notion also saw a mass liquidation of oil longs over the past week, as prices crashed to 15-month lows.
Brent oil futures fell 0.5% to $72.61 a barrel, while West Texas Intermediate crude futures fell 0.5% to $66.62 a barrel by 23:26 ET (03:26 GMT). Both contracts lost over 10% last week.
"Broader market concerns weighed heavily on the oil market last week, while fundamentals have clearly not been strong enough to prop up the market," analysts at ING wrote in a note, warning that fears of an economic slowdown and anticipation of the Fed meeting will keep markets volatile this week.
ING had also slashed its outlook for Brent prices this year to $90 a barrel from $98 a barrel, stating that $100 a barrel was appearing less likely.
Crude prices were hammered by concerns that a banking rout could spill over into the broader economy, denting activity and potentially damaging crude demand. Fears of slowing demand have weighed heavily on oil markets this year, keeping prices largely depressed.
Prices took little support from the Fed, European Central Bank, and other major central banks pledging to increase market liquidity and support the banking sector. The move came shortly after Swiss bank UBS Group AG (NYSE:UBS) announced that it will buy beleaguered peer Credit Suisse Group (SIX:CSGN) in a “historic deal” facilitated by regulators, intended to help ease concerns over a banking crisis.
Focus is now squarely on the results of the Fed’s two-day meeting on Wednesday, where the central bank is expected to hike interest rates by a relatively smaller 25 basis points. Uncertainty over the meeting is expected to spur more volatility in markets.
But oil also faces other headwinds. A consistent build in U.S. inventories points to a potential supply glut in the world’s largest oil consumer, while major crude importer China saw a sluggish recovery in oil imports despite the lifting of anti-COVID measures.
On the other hand, oil bulls were still holding out hopes for more production cuts by the Organization of Petroleum Exporting Countries and allies (OPEC+), following meetings between Russian and Saudi Arabian ministers last week.