BBI INFO
1. Review of the Markets: 1. Crude oil, a risk commodity, has dropped more than 5% in daily dealing, with WTI falling to $72.3 per barrel and Brent crude oil dropping to $78.33 per barrel. The early U.S. market’s drop was reduced to around 2% thanks to demand from China. Both West Texas Intermediate and Brent crude oil prices fell to their respective lows of $74.68 and $80.65 per barrel, respectively.
2. the FDIC is getting ready to put Silicon Valley Bank up for sale once more.
FDIC officials informed Senate Republicans on Monday that they had more leverage in selling Silicon Valley Bank now that authorities have deemed the bank’s collapse to be a danger to the financial system, after failing to find a buyer over the weekend. This allows for more leeway on the part of authorities to give favorable conditions, such as loss-sharing arrangements, to prospective purchasers.
3. U.S. President Biden delivered a speech on the banking system, saying that the Federal Deposit Insurance Corporation has controlled the assets of Signature Bank and Silicon Valley Bank, taxpayers will not bear any losses, and the funds will come from insurance fund fees; Congress and regulators will be required to strengthen bank rules
4. The Federal Reserve’s high interest rate strategy is ruining the banking sector’s balance sheet, according to a former assistant secretary of the US Treasury. The vulnerability of the five biggest institutions in the United States is equal to twice the world’s gross domestic product, making the American financial system extremely vulnerable. The US financial problem will eventually impact other countries due to our linked world.
5. Fed interest rate swaps indicate that a no-rate-hike outcome is the most probable outcome for the Fed. Traders anticipate a 46% chance of no change in interest rates from the Federal Reserve in March, and a 54% chance of a rate hike of 25 basis points. Traders also anticipate a modest rate hike of 25 basis points from the Bank of England.
6. Nick Timiraos, on the SVB episode, says the Fed can decide where to put its attention.
Megaphone for the Federal Reserve According to an article by Nick Timiraos, a common saying holds that the Federal Reserve will keep raising interest rates unless something catastrophic happens. It came as a huge shock that last year’s rate increases seemed to have no negative effect, but that’s no longer the case. Following the failures of Silicon Valley Bank and Signature Bank on Monday, regional bank equities plunged, putting pressure on the Federal Reserve to deal with financial stability concerns while combating inflation, a situation it has been attempting to prevent for the past year. That situation could compel Federal Reserve Chairman Jerome Powell and his peers to prioritize issues.
7. the Federal Reserve’s oversight of Silicon Valley Bank has been called into doubt. The failure of Silicon Valley Bank has led some to doubt how well the Federal Reserve was supervising banks generally. After the unexpected failure of Silicon Valley Bank, authorities in the United States offered a liquidity strategy to stabilize smaller financial institutions. Authorities in the San Francisco Federal Reserve and the state of California are being closely examined by the Biden administration, according to those in the know. By May 1st, the Federal Reserve will also have finished its evaluation of its supervision of SVB.
8. US cash management institutions are increasing the volume of short-term bond sales; Fannie Ma is delaying high-risk mortgage bond issuing deals due to market volatility.
9. HSBC Holdings has announced that it will purchase Silicon Valley Bank’s UK company for 1 pound; the UK subsidiary’s real assets are estimated to be around £1.4 billion.
10. The present government has not given Saudi Aramco permission to raise output to more than 13 million barrels per day, according to the company’s chief executive officer.
MARKET VIEWPOINTS
According to Ed Moya, an expert at OANDA,
The wild fluctuations in oil prices aren’t going away anytime soon.
Traders in the energy sector did not expect the failure of the Silicon Valley bank to cause a widespread “risk-off” trend that would drive Brent oil prices below $80 per barrel. Commodities dropped as a result of the same volatility that hit the credit markets. Short-term crude price fluctuations are likely to continue, and inflation data due out on Tuesday could derail a recent rise in Treasuries. Further, oil prices stayed high even as China’s moderate economic growth goal dropped shy of market forecasts. Therefore, crude oil markets should see robust support so long as financial security worries do not dominate.
Senior Associate at EIR, an Envirus company and energy-focused SaaS platform, Chet Sharma
We anticipate that crude oil prices will be highly unpredictable in 2023 as supply growth struggles to keep up with demand growth and the global economy slows, leading to OECD crude oil stockpile levels that are significantly lower than the 5-year average. Extreme instability in the oil market is possible due to the year-long rivalry between production and demand, as well as the elevated global risks presented by Russia and OPEC. We predict that by year’s end, oil prices will have risen above US$100 per barrel due to a combination of factors including low inventories and solid trends.
Petroleum Analyst at PVM, Stephen Brennock
The oil market may strengthen in the second half of the year, but it’s too soon to tell.
One of the many mysteries of the oil market is the extent to which the nation of China’s desire for petroleum oil will increase now that it is open for business again. Recent macroeconomic data has been positive, but this has not yet translated into a sizable increase in China’s gasoline usage. The Russian delivery scenario is also a mystery. It’s possible that Russia’s petroleum shipments will hold strong despite production cutbacks. For the near future, oil rates will remain within a tight band due to the aforementioned risks. It’s almost become a cliche to speculate that energy costs will rise in the second part of the year. The basics of crude oil may strengthen in the future months, but this prediction is premature due to the numerous risks that remain.
Ms. Emma Richards, Associate Director, Fitch Oil & Gas
Oil price spikes and crashes are not expected to happen this year.
I anticipate continued volatility in energy costs this year, though perhaps not to the same extremes as last. Russian crude oil output and shipments are forecast to fall further in 2023 than they did in 2022, but the market has had time to adapt, so the risk premium from the war is expected to be much lower. When Russia announced a production cut of 500,000 barrels per day in March, the market reaction was relatively muted, which may partly reflect the fact that the decline in Russian crude oil production was already expected, but also indicates that investors are somewhat wary of Conflict-related developments have become less sensitive. There is still a lot of ambiguity about the global supply and demand forecast and a lot of space for price fluctuation due to the dramatic shifts in market expectations over the past year, but I do not anticipate a revival on the scale seen when the conflict first broke out. Significant shifts.
