Oil extended losses ahead of key inflation data as the biggest US bank collapse since 2008 continued to ripple through financial markets.
West Texas Intermediate traded below $74 a barrel after closing 2.5 percent lower on Monday following a volatile session. Investors will be watching the consumer price index read due later Tuesday for clues on the path forward for monetary tightening, though bets are increasing the Federal Reserve won’t raise interest rates next week due to the fallout from the demise of Silicon Valley Bank.
Brent’s nearby put skew — a gauge of how much more traders are willing to pay for contracts that profit from a price decline rather than a rally — rose to the highest level since mid-August on Monday amid the market turmoil.
“Oil has been unable to escape the spillover from the collapse of SVB,” said Warren Patterson, head of commodities strategy for ING Groep NV. “There is still plenty of room for further volatility in the short term with US CPI data.”
Crude has had a bumpy year as traders juggle concerns over a global economic slowdown and optimism around China’s demand rebound after the nation ended Covid Zero. A measure of volatility for WTI skyrocketed on Monday.
OPEC is scheduled to issue its monthly market report later Tuesday, while the International Energy Agency follows with its release on Wednesday, providing on snapshot on the outlook for supply and demand.
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