Fear for the economy is stoked by the crisis in the banking sector and has caused oil prices to drop to a year-low.

Yesterday (15 March), Brent crude, which is the global energy benchmark, experienced a 5 per cent decline and settled at $73.69 a barrel.

As a result, it has fallen more than 10 per cent this week and is currently at its lowest point since December 2021.

The US marker, West Texas Intermediate, also decreased and settled at $67.61, falling below $70 per barrel.

Last week's collapse of Silicon Valley Bank in the US caused a sell-off that affected oil markets as well.

Credit Suisse, based in Switzerland, also took a hit. By Wednesday, the bank's shares had lost 24 per cent. The selling pressure also hit bank stocks in Europe and the US.

Traders worried financial market contagion would reduce consumer spending and impact oil demand in the physical economy.

Analysts have attributed the fall in oil prices to speculators who made bets on higher prices in recent weeks, and were now forced to sell.

Traders had become more optimistic about the possibility of a recovery in Chinese fuel demand, coupled with a decrease in oil exports from Russia following the increasing sanctions over Ukraine invasion.

An 18-month high in oil inventories for rich countries was reported by the International Energy Agency, indicating weak global demand. This news, combined with other factors, contributed to a bearish sentiment in the market.

IEA reported a significant increase in stocks, but expects a record high in global demand to pick up speed later this year.

As per some experts, the current oil dip is a result of general market anxieties, and oil prices could potentially drop another $10 due to momentum.

With crude prices experiencing a sharp decline, the US government may purchase oil to refill its Strategic Petroleum Reserve, having already sold millions of barrels last year to stabilize the energy market.

The Biden administration had previously stated its intention to repurchase oil if prices fell to $70 a barrel.

The US Department of Energy deferred to a prior White House statement in December, noting that they would buy oil when WTI crude prices are at or below $67 to $72 per barrel, when asked for comment.