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Oil prices dropped early on Wednesday after another banking sector scare and after U.S. consumer confidence fell for the third time in four months.
As of 8:00 a.m. EDT on Wednesday, ahead of the EIA’s weekly inventory report, the U.S. benchmark WTI Crude was trading down by 0.47% at $76.71. The international benchmark, Brent Crude, was barely hanging onto the $80 a barrel level – Brent was down by 0.85% on the day at $80.09.
Oil continued the slide from Tuesday when prices fell by 2% to the lowest level so far this month. Prices were dragged down by renewed concerns about the U.S. banking sector after California-based lender First Republic spooked the financial markets on Tuesday, saying it had lost 40% of its deposits in the first quarter. First Republic shares plunged by 49% on Tuesday, reigniting fears of another banking sector crisis after the collapse of SVB in March. A stronger U.S. dollar also weighed on oil prices on Tuesday. Estimates provided by the American Petroleum Institute (API) of a large crude oil draw and a drop in gasoline inventories failed to offset fears about the economy.
U.S. consumer confidence declined in April to 101.3, down from 104.0 in March, the Conference Board said on Tuesday, the third drop in consumer confidence in four months.
“Consumers became more pessimistic about the outlook for both business conditions and labor markets. Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months,” said Ataman Ozyildirim, Senior Director, Economics at The Conference Board.
“The oil market has already seen a fair amount of weakness over the last week as falling refinery margins raised concern about demand,” ING strategists Warren Patterson and Ewa Manthey said on Wednesday.
“With little in the way of oil-related releases this week, oil price direction is likely to continue to be dictated by external drivers,” they added.
By Michael Kern. for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,