Oil prices in the international market fell by US$4 along with equities as the collapse of Silicon Valley Bank raised fears of a fresh financial crisis, but a recovery in Chinese demand provided support.

Brent crude futures were also down US$3.96, or 4.8%, to US$78.82 per barrel by 12:20 GMT. West Texas Intermediate U.S. crude futures (WTI) fell by US$3.86, or 5%, to US$72.82 a barrel. The decline means that Brent hit its lowest levels since early January while WTI touched prices not seen since early December.

Fears of contagion from the failure of Silicon Valley Bank led to a selloff in US assets at the end of last week, while state regulators closed New York-based Signature Bank on Sunday.

Europe’s STOXX bank index was down 5.7%, having shed 3.8% on Friday. US authorities launched emergency measures on Sunday to shore up confidence in the banking system.

Market sentiment was already fragile as worries about further monetary tightening by the Fed have been exacerbated by high crude oil inventories in the U.S., analysts said in a note.

“It’s like the battle of surging activity data in the East meets macro malaise in the West,” said Stephen Innes, managing partner of SPI Asset Management, commenting on the competing sentiment drivers in the crude market.

In recent days a weaker dollar, which makes oil cheaper for holders of other currencies, has lent some support to prices.

Oil’s fall follows positive momentum last week. From a medium- to long-term supply perspective, energy services firm Baker Hughes Co said US energy firms last week cut the number of oil and natural gas rigs operating for a fourth week in a row for the first time since July 2020.

Global Fuel Energy Price Index

Meanwhile, the global fuel energy price index stood so far at 223.27 index points 2023, up from 100 in the base year 2016. Figures increased six-fold between summer 2020 and summer 2022 as a result of an ongoing energy supply shortage that was exacerbated by the Russia-Ukraine war. The decrease noted in October was due to mild weather and reduced demand outlooks as recession fears loomed. The fuel energy index includes prices for crude oil, natural gas, coal, and propane.

However, as prices declined on the international market, it could translate to a decrease in prices at the pump in some countries. That notwithstanding, it might be very difficult to see a reduction in Ghana due to instability of the Ghanaian cedi against the US dollar.

According to IEA forecast for quarter one, Russia and China will be the key countries shaping the oil price forecast in 2023, as the oil prices will be driven by the balance between the tightening Russian supply and China’s demand growth.

In their oil price predictions, the research indicated Brent crude oil price to trade at $105/bbl in March 2023, advancing to $115 in June, yet sliding down to $110 in September, and returning to $105 in December.

Meanwhile, Fitch Solutions, as of December 2022 commodity price assumptions, saw Brent averaging at $85/bbl in 2023, sliding to the average of $65 in 2024. Their oil price forecast for 2025 saw the commodity trading at $53 in the year, staying on the same level in 2026.