WTI recovers a touch from multi week lows as bulls eye $100.00
|- WTI attempts to recover from the bottom of the barrel.
- The supply remains tight but the uncoiling process could come underway.
West Texas Intermediate (WTI) crude oil was lower again overnight as recession worries continue to weigh on the black gold. At the time of writing, WTI is trading at $98.11 after recovering from the lows of $95.09.
The bears moved in overnight when investors took to the sidelines in anticipation of the Federal reserve minutes and presumed hawkishness from the central bank. The pessimists are expecting that higher rates will lead to a global recession. The consensus is forcing a bid into the bond markets and sending the greenback to fresh 20-year highs.
''The minutes of the US Fed’s June meeting (where they hiked 75bps) reveal a central bank laser focussed on defending its inflation target,'' analysts at ANZ Bank explained.
''There is clearly a concern amongst the FOMC about inflation expectations becoming unanchored,'' the analysts added. ''They noted “that a significant risk… was that elevated inflation could become entrenched if the public began to question the resolve of the Committee to adjust the stance of policy as warranted”. The Fed is understandably eager to reinforce to the public that they’ve got this, and hiking 75bps (and signalling many more hikes to come) certainly reinforces the message.''
Meanwhile, for related updates in the oil market, the analysts noted that ''Kazakhstan is the latest producer to be running into issues. The Caspian Pipeline Consortium, which exports Kazakh crude from a key terminal on the Black Sea, was ordered to halt loadings for 30 days due to a violation of a spill-prevention plan''.
Supply remains tight and little progress has been made toward solving structural supply challenges. Analysts at TD Securities argued that ''even a slow rate of demand growth can endanger energy supply. In this context, Brent crude and distillates prices are also exhibiting strong asymmetry towards upside moves in demand, which could point to an uncoiling process should commodity demand rebound.''
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