What happened

Shares of oil and gas companies Occidental Petroleum (OXY -0.46%), Cheniere Energy (LNG 0.65%), and Enbridge (ENB 0.84%) were plunging today, down 5.9%, 5%, and 4.9%, respectively, as of 1:50 p.m. ET.

The culprit for today's fall was easy to spot: Overall oil and natural gas prices plunged today, as another prominent bank appears to be in severe trouble. Following three recent U.S. bank failures last week, today it was Europe's Credit Suisse (CS) that was the catalyst for economic jitters.

Rapid interest rate increases from global central banks are now causing stresses in the least well-managed banks, both in the U.S. and Europe. That banking crisis is now making its way into commodity markets, which appear to be anticipating the recession the global economy has thus far escaped since the rate-hiking cycle began last year. In addition, data from both the Energy Information Administration (EIA) and Refinitiv pointed to a potential near-term supply glut of both oil and natural gas, which didn't help matters.

So what

Today, Credit Suisse's largest shareholder said it would no longer provide further financial support to the bank, sending panic into shares, which were down 22% today and have fallen 67% over the past year. That pronouncement came after the bank disclosed in its annual report released on Tuesday that it had identified "material weaknesses" in its financial reporting.

Silhouette of land-based oil rig with worker.

Image source: Getty Images.

So the problem isn't beginning in the oil and gas sector. Still, if a banking crisis spurs banks to pull back on lending activity to shore up their balance sheets and liquidity, it could put a damper on global economic growth, and economic growth drives demand for oil and gas prices.

Meanwhile, a new forecast for natural gas demand and new data on oil inventories aren't helping matters. On Wednesday, Refinitiv revised lower its forecast for "heating degree days," or days of the year that will be below 65 degrees Fahrenheit and would therefore require heating from natural gas. The data provider now sees 300 heating degree days this year, down from its prior forecast of 318.

The EIA also disclosed that U.S. crude inventories rose by 1.6 million barrels last week, taking inventories to 480.1 million barrels, about 7% higher than the five-year average. Analysts had expected crude inventories to fall by 100,000 barrels.

Weakness in oil markets is sure to affect Occidental, whose upstream operations are price sensitive to oil prices. Meanwhile, natural gas price weakness on warmer weather should also hamper the profit outlook for liquified natural gas exporter Cheniere. And weaker oil and gas prices could affect results for Enbridge, which operates midstream pipelines and processing facilities for oil and natural gas companies, carrying about 30% of all U.S. oil and 20% of all U.S. natural gas.

Now what

While the oil and gas price "boom" fueled inflation last year, it now appears the Federal Reserve's rapid rate increases and increased oil and gas production coming online is causing a "bust" in commodity prices. While unfortunate and perhaps a sign of coming economic weakness, lower commodity prices could also help bring down inflation. Once the inflation figures come down, the Fed will be able to relax, and the economy should eventually recover.

While renewables are on the rise over the long term, the world will still need oil and gas for some time to come. Therefore, if your investments are underweight the oil and gas sector, now may be a good time to add some exposure on this sell-off to rebalance. After all, Warren Buffett just added even more shares to his Occidental stake just last week.