From Cyprus to oil

24/7 Wall St.

153715598The apparent resolution of the banking crisis in Cyprus has sent the price of WTI crude oil up more than 1.5% today, now above $95 a barrel. Brent crude is also up about 0.7%, above $108 a barrel. Traders likely have concluded that with Cyprus’s problem banks now in the rear-view mirror, it is safe to assume that demand for oil will rise.

That may not be the way it works out. In the first place, the Cypriot economy is very small. The chances that it really will sway demand for oil approach zero. And the knock-on effect of the solution — essentially confiscating deposits from accounts greater than €100,000 — will likely be more movement of more money out of banks in eurozone countries that are deemed to be shaky. That list currently includes Portugal, Spain, Italy and Slovenia, and France could be added. Any large depositor is almost certain…

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