By Stephanie Kelly

NEW YORK (Reuters) -Oil prices fell nearly 2% in volatile trading on Monday as the collapse of Silicon Valley Bank roiled equities markets and raised fears of a fresh financial crisis, but a recovery in Chinese demand provided support.

futures were down $1.51, or 1.8%, to $81.27 per barrel by 1:14 p.m. EDT (1714 GMT). The global benchmark earlier fell to a session low of $78.34, its lowest price since early January.

U.S. West Texas Intermediate crude futures (WTI) dropped $1.40, or 1.8%, to $75.28 a barrel. WTI earlier declined to $72.30 a barrel, its lowest price since December.

Fears of contagion from the failure of Silicon Valley Bank led to a sell-off in U.S. assets at the end of last week, while state regulators closed New York-based Signature Bank (NASDAQ:) on Sunday.

U.S. stock indexes were largely higher in choppy trading on Monday as investors weighed a possible pause in interest rate hikes by the Federal Reserve in March. U.S. authorities launched emergency measures on Sunday to shore up confidence in the banking system. [.N]

The sudden shutdown of SVB Financial triggered concerns about risks to other banks resulting from the Fed’s sharp rate hikes over the last year, but has also spurred speculation about whether the central bank could slow the pace of its monetary tightening.

Oil prices whipsawed on Monday as investors considered market effects from the news.

“It was kind of surprising today to see the big drop in oil considering the fact that the Fed more than likely will have a harder time raising interest rates aggressively and that should cause weakness in the dollar,” Price Futures Group analyst Phil Flynn said.

A weaker greenback makes oil cheaper for holders of other currencies and typically supports oil prices.

Worries about further Fed monetary tightening have been exacerbated by high {{8849|U.S. crcrude oil inventories.

Oil’s fall followed positive momentum on Friday, when U.S. employment data surprised to the upside. Data for February beat expectations, with nonfarm payrolls rising by 311,000, compared with expectations of a gain of 205,000 in a Reuters survey.