Oil Futures Advance in Choppy Trade After ECB Hikes Rates
WASHINGTON (DTN) -- Following three consecutive session losses, oil futures traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced on Thursday after the European Central Bank this morning lifted its benchmark lending rate by 50 basis points, defying expectations of pausing rate hikes amid the banking turmoil, in a move that boosted the Euro against the U.S. dollar. Gains in the oil complex also follow reports the biggest banks in the United States have agreed to provide as much as $30 billion in deposits to the First Republic Bank in an effort, supported by the U.S. government, to shore up liquidity and confidence in the battered California lender, lifting market sentiment.
A consortium of banks, including JP Morgan Chase, Citigroup Inc., Bank of America Corp., Wells Fargo and Co., and Morgan Stanley, among others are orchestrating a rescue plan for the First Republic Bank, according to media reports. Shares of First Republic seesawed on Thursday, plunging more than 30% earlier in the session before retracing 28% of those losses in reaction to the news. The reports of a rescue plan helped to shore up stocks of other U.S. regional lenders that have been pummeled in recent days that dragged on broader market sentiment. Western Alliance and PacWest advanced 18% and 1.7% respectively, while S&P Regional Bank ETF rose 3.5%. All three declined earlier in the session.
Elsewhere, ECB on Thursday delivered another 50-basis point increase to its benchmark lending rate but refrained from signaling any further rate moves in coming months.
"The Governing Council is monitoring current market tensions closely and stands ready to respond as necessary to preserve price stability and financial stability in the euro area. The ECB's policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy," said ECB in announcing the rate hike.
ECB President Christine Lagarde in a news conference following the rate decision stressed still high inflation across the euro area that is projected to "remain too high for too long," while emphasizing the bank's data-dependent approach to monetary policy.
ECB's latest rate hike follows turmoil in Europe's major bank Credit Suisse that just received a $54 billion loan against its collateral from the Swiss National Bank. In a joint statement released this morning, the Swiss National Bank and the Swiss Market Supervisory Authority said Credit Suisse "meets the capital and liquidity requirements imposed on systemically important banks."
The funding deal calmed markets for the time being, with European equities recouping some of Wednesday's steep losses and stocks on Wall Street finishing the session higher while the U.S. dollar retreated. The U.S. dollar index weakened 0.18% against a basket of foreign currencies to settle at 104.092 after a blowout rally on Wednesday tied to investors fleeing riskier assets for the safety of the U.S. currency.
At settlement, West Texas Intermediate contract for April delivery advanced $0.74 to $68.35 per barrel (bbl), and the international crude benchmark Brent contract for May delivery rallied to $74.70 bbl, up $1.01. NYMEX RBOB April futures gained $0.0651 to $2.5035 gallon, and ULSD April futures added $0.0386 to $2.6435 gallon.
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