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On March 10th, European Central Bank (ECB) Governing Council member Matthew Mueller stated that the likelihood of a near-term interest rate hike has increased, but officials should not react hastily to the Iran war and its impact. He said, "The probability of the next change in the policy rate is now more inclined towards an upward rather than a downward adjustment. This probability may have increased in the past few weeks." However, he also stated that the ECB should not "make any hasty decisions," adding, "We should first observe whether the current rise in energy prices is merely temporary." As the Middle East conflict has driven up energy prices, traders have increased their bets on monetary policy tightening. However, after initially pricing in two rate hikes this year, each by 25 basis points, these bets have fallen back to less than one after Trump hinted that the conflict might end soon. ECB Governing Council member Marc-André Simkus also warned against hasty action. He said, "Remain calm and do not overreact, because things are still evolving. If the situation continues, if the conflict spreads, it will not only affect inflation but also have a broader impact on the Middle East and Europe."Saudi Aramco CEO: Of the 7 million barrels per day capacity of the East-West pipeline, nearly 2 million barrels per day will be delivered to domestic refineries in the west, some of which have export capabilities.Volkswagen CEO: We need to work harder; our costs are still too high.Volkswagen CEO: Production costs at the three major German factories have been reduced by 20%.European Council President Costa: The EU calls on all parties to the Middle East war to exercise maximum restraint and return to the negotiating table.

WTI bulls enter at critical support and eye the Federal Reserve

Daniel Rogers

Sep 20, 2022 14:31

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West Texas Intermediate is currently up 0.11 percent on the day and has traded between $82.11 and $86.21 bbls. The black gold was reversing early offers that led to the lows even as US dollar bulls came in as markets awaited the Federal Reserve and a multitude of other central banks this week.

 

Fed funds futures have priced in a 79% chance of a 75-basis-point rate hike this week and a 21% chance of a 100-basis-point boost at the conclusion of the two-day Fed policy meeting. Nonetheless, some analysts predict that the central bank could move to increase interest rates by a full percentage point after August inflation exceeded expectations. The DXY index indicates that the demand for safe haven assets, such as the U.S. dollar, is close to its 20-year high. As a result, the demand for oil may decrease, and the dollar's demand as a safe haven asset nears a 20-year high.

 

Nonetheless, China eased a two-week lockdown on the 21 million residents of Chengdu, restoring normal activity to the capital of Sichuan, which may have contributed to the increase in oil prices at the beginning of the week. The Department of Energy said on Monday that the United States will sell 10 million barrels of oil from its strategic reserve for delivery in November.

 

"The markets are increasingly pessimistic about the likelihood of a rapid resolution to the Iran issue, which has resulted in a revival in energy supply risks despite the continuous decline in prices. As markets reprice supply risk premiums, the lack of liquidity might amplify crude's upward volatility, according to TD Securities analysts.


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