Brent crude prices logged losses on Monday, dropping below $72 per barrel in intraday trade amid volatility in the banking sector.
The Brent contract with May delivery was trading at $71.64 per barrel down by $1.33 per barrel from last Friday’s close while the front-month April WTI Nymex was at $65.52 per barrel, lower by $1.22 per barrel from the previous settlement.
Oil prices have come under pressure from a crisis in the Western banking sector, which has seen the downfall of tech startup-focused Silicon Valley Bank and the takeover of embattled Credit Suisse by Swiss rival UBS in the span of two weeks.
Two sources within the influential OPEC+ alliance signaled to CNBC at the end of last week that banking uncertainty was feeding into fears of another financial collapse to the tune of the 2008 crisis.
OPEC+ delegates could only comment on condition of anonymity, as they are not allowed to publicly discuss the topic.
One of the sources noted that the drop was likely temporary and not underpinned by supply-demand fundamentals surrounding the physical commodity, but stressed the need to monitor the potential effect on central bank interest rate decisions and inflation.
The European Central Bank on March 16 pressed ahead with a further rate hike of 50 basis points, while the US Federal Reserve is due to reach its own rate decision this week.
Over the past year, OPEC+ has championed stability in the oil price landscape to encourage long-term investment in spare capacity and avoid supply shortages.
An OPEC+ ministerial technical committee will next be meeting on April 3.
Writing by Tersoo Nicholas