Crude oil prices sell-off intensifies after Kremlin drone attack

By:
on May 3, 2023
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  • Crude oil prices tumbled for the third straight day.
  • Russia announced that there was a drone attack in the Kremlin.
  • OPEC+ started lowering oil production this week.

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Energy prices continued slipping as concerns about a recession continued. Brent crude oil price crashed to $73 while West Texas Intermediate (WTI) dropped below $70 for the first time since March this year. In all, oil has dropped by almost 50% from the highest point in 2022.

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Crude oil prices dropped even as the OPEC+ cartel started lowering production as agreed in last month’s meeting. Therefore, it seems like investors believe that oil demand is cooling, as evidenced by the weak manufacturing PMI data.

The main concern among investors is that the banking sector is showing strains in the US. On Monday, as we wrote here, First Republic Bank collapsed and then was acquired by JP Morgan. Other banks like Western Alliance and PacWest have plunged by double-digits. The SPDR Regional Bank ETF (KRE) has dropped by over 5% this week.

Therefore, there is a likelihood that the American economy will sink into a recession in the coming months. In a note, an analyst at Saxo Bank said:

“With short-sellers back in control, prices may once again overshoot to the downside. The Fed is expected to hike once again later today, and it continues to weigh on the demand outlook.”

The other main reason why crude oil prices crashed is that Russia is still shipping millions of barrels per day. Data showed that the country exported over 4 million barrels of oil per day, which is the highest point since it invaded Ukraine. The most recent crude oil news is that there was a drone attack in Kremlin although President Putin was safe. It is unclear how this attack will impact oil prices in the near term.

Oil Commodity