Oil edges up on historic Swiss banks deal, central banks support

Oil prices rose on Monday after suffering their biggest weekly loss in months as UBS struck a deal to buy Credit Suisse and some of the world’s largest central banks sought to reassure and stabilise global financial markets.

Brent crude futures rose 35 cents, or 0.5 per cent, to $73.32 a barrel by 0007 GMT after a near 12 per cent loss last week, its biggest weekly fall since December.

US West Texas Intermediate crude was at $67.11 a barrel, up 37 cents, or 0.6 per cent, after a 13 per cent decline last week, its biggest since last April.

Switzerland’s largest bank, UBS, announced late on Sunday it will buy the country’s No. 2 lender Credit Suisse in a historic deal. Following the announcement, the US Federal Reserve, European Central Bank and other major central banks pledged to enhance market liquidity and support other banks.

The Swiss bank deal and central banks’ measures to inject liquidity into the markets are restoring market confidence, leading to a relief rally in risk assets, including the crude markets, CMC Markets analyst Tina Teng said.

“The relief rally in broad markets may continue if the Fed softens its tone on rate hikes,” she added.

Investors are pricing a 60 per cent probability that the Fed will raise rates by 25 basis points on Wednesday, but some executives are calling on the central bank to pause its monetary policy tightening for now but be ready to resume raising rates later. A slowdown in interest rate hikes could depress the greenback, making dollar-denominated commodities more affordable for holders of other currencies.

Separately, Goldman Sachs cut its forecasts for Brent crude after prices plunged on banking and recession fears.