WTI escalates above $77.00 on Fed’s slower and smaller interest rate hike approach
|- The oil prices have climbed to near $77.50 as the Fed has ditched a bigger rate hike regime.
- US recession risk has not faded yet as the Fed has hiked its terminal rate projection to 5.1%.
- A solid build-up of oil inventories reported by the EIA has failed to weaken the black gold.
West Texas Intermediate (WTI), futures on NYMEX, have displayed a bullish three-session spell on hopes of a recovery in global economic prospects. The oil prices have climbed above $77.50, recovered dramatically after registering a fresh annual low at $70.61 last week, as the Federal Reserve (Fed) has ditched the bigger interest rate regime.
Termination of the 75 basis points (bps) interest rate hike spell by the Fed is the result of a slowdown in the United States Consumer Price Index (CPI), consecutively for two months. The headline US CPI that inculcates oil and food prices in calculation dropped to 7.1% from the prior release of 7.7%. This has trimmed the risk of recession in the US economy for a while but the recession risk has not faded yet as the Fed policymakers have advocated for a higher terminal rate at 5.1% by the end of CY2023.
Also, Fed chair Jerome Powell has promised to keep policy restrictive enough to achieve a 2% inflation rate. The US Dollar Index (DXY) is hovering around 103.62 after displaying wild gyrations. The US Dollar is expected to display weakness further as the Fed has approved a smaller and slower interest rate hike approach, which will eventually support oil prices.
The oil prices have not reacted much to the solid build-up of oil inventories reported by the official US agency. The US Energy Information Administration (EIA) has reported a build-up of oil stockpiles by 10.231M for the week ending December 09.
Meanwhile, investors are awaiting updates on the Keystone pipeline restart from Canada’s TC Energy Corp. Last week, the 622,000 barrel-per-day pipeline was shut after leaking oil into a creek in Kansas. Over that, the firm will provide an update ahead, as reported by Reuters.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.