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On September 17th, local time, the Federal Reserve held its September 2026 FOMC meeting, raising the target range for the federal funds rate to 3.75%-4.00%. Donghai Securities analyst Liu Sijia stated that the Feds 25bp rate hike was in line with market expectations. Before the meeting, the market had already priced in a rate hike with a probability exceeding 90%. Besides fulfilling the hawkish stance since the Jackson Hole meeting, this also helps to rebuild the Feds image of independence and reduce the upward risk of the term premium in long-term US Treasury yields. Currently, CME data shows a probability of around 50% for an October rate hike and nearly 90% for another rate hike this year, close to the expectations shown in the dot plot. However, without the inflationary concerns arising from rising oil prices due to supply factors, the current K-shaped economic divergence in the US and the weak balance in the labor market with declining supply and demand do not support the Fed initiating a cyclical series of rate hikes. Warsh also stated that current financial conditions are not restrictive, and this rate hike is a partial withdrawal of easing. Whether a cyclical series of rate hikes will begin remains uncertain.The yield on 30-year UK government bonds fell 5.9 basis points on the day, currently trading at 5.8003%.ECB Governing Council member Rehn: The tightness of the Eurozone labor market after the Ukraine conflict and the post-pandemic crisis is not the same as in 2022.Bank of England: GDP growth is expected to be 0.4% in the third quarter (compared to a 0.1% growth forecast in July).ECB Governing Council member Rehn: The ECB closely monitors the "political situation" in Europe and has an effective toolbox to ensure the smooth transmission of monetary policy.

WTI struggles at $87 as recession worries probe OPEC's forecast and supply deficit fears intensify

Daniel Rogers

Sep 14, 2022 11:42

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After reverting from the weekly high, WTI crude oil traders seek clear direction around $87.50 during Wednesday's Asian session. However, the present hesitation in the price of black gold may be attributable to the mixed concerns regarding the demand-supply matrix.

 

The Organization of the Petroleum Exporting Countries (OPEC) indicated in a monthly report that oil consumption will climb by 3,1 million barrels per day (bpd) in 2022 and by 2,7 million barrels per day (bpd) in 2023, which is unchanged from last month. Despite obstacles such as rising prices, the news also highlighted indications that major economies were performing better than projected.

 

The news that the United States intends to replenish its emergency oil reserves, as well as the German and European move to control Russian oil and gas prices, could also be favorable for energy prices. In addition, rumors that the Western oil deal with Iran is a long way off are bolstering fears of a supply bottleneck and should have helped energy bulls.

 

Tuesday's US inflation statistics revived concerns about the Federal Reserve's fast rate hike and exacerbated recession concerns. Also acting as downward drivers for WTI crude oil are expectations of economic slowdown due to China and Russia-related concerns.

 

In spite of this, the US Consumer Price Index (CPI) for August increased by 8.3% year-over-year, surpassing market expectations by 0.1%. However, the monthly data increased to 0.1%, exceeding the -0.1% projected and the 0.0% shown in previous assessments. The core CPI, or CPI excluding food and energy, likewise exceeded the 6.1% consensus and 5.9% prior to printing at 6.3% for the month in question.

 

It should be mentioned that the weekly prints of the American Petroleum Institute's (API) industry inventory report also contributed to the commodity's downfall. The API Weekly Crude Oil Stock climbed to 6,035 million during the week ending September 9, up from 3,645,000 the previous week.

 

In the future, the price of black gold may stay under pressure due to a stronger US dollar and economic troubles. Before today's official weekly inventory data from the U.S. Energy Information Administration, however, the supply crisis concerns could test the bears (EIA). Thursday's US Retail Sales for the month of August and Friday's preliminary reading of the September Michigan Consumer Sentiment Index will also warrant close attention.

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