Oil prices plunged by nearly 5% on Wednesday to settle at the lowest levels in more than a year on concerns that a crisis of confidence in the banking sector could trigger a recession and cut demand.
Crude recovered some of its earlier losses along with benchmark equity indexes after Swiss regulators pledged a liquidity lifeline to Credit Suisse, which had earlier seen shares fall as much as 30%.
Both crude benchmarks hit their lowest levels since December 2021 and have fallen for three straight days.
Brent crude settled down $3.76, or 4.9% lower, at $73.69 a barrel. U.S. West Texas Intermediate crude (WTI) closed down $3.72, or 5.2% lower, at $67.61.
Hedge funds were liquidating because of rising interest rates and economic uncertainty, said Dennis Kissler, senior vice president of trading at BOK Financial, adding that heavy selling pressure on U.S. stock markets on Wednesday was adding to the fund liquidation in crude.
Brent has fallen by more than 10% since Friday's close, while U.S. crude is down more than 14%.
The U.S. dollar also strengthened against a basket of currencies, making it more expensive for holders of those currencies to purchase crude. [USD/]
Adding to the bearishness in the market, U.S. crude stockpiles rose by 1.6 million barrels last week, government data showed, more than the expected rise of 1.2 million barrels in a Reuters poll of analysts.
"The primary driver behind the price weakness is broad concern for the global economy and risk-off sentiment in the market," Stacey Morris, head of energy research at data analytics company VettaFi.
Meanwhile, figures showed that China's economic activity picked up in the first two months of 2023 after the end of strict COVID-19 containment measures.
Wednesday's monthly report from the International Energy Agency flagged an expected boost to oil demand from China, a day after OPEC increased its Chinese demand forecast for 2023.
(Reporting by Arathy Somasekhar, Alex Lawler; Additional reporting by Florence Tan in Singapore and Yuka Obayashi in Tokyo; Editing by Mark Potter, Richard Chang and Jamie Freed)
