WTI bears in the market on recession fears

West Texas Intermediate crude oil is lower on Thursday despite risk-on markets that continued to digest the more dovish guidance from the Federal Open Market Committee. However, the prediction from the central bank of more to come renewed recession concerns and has weighed on the oil price. West Texas Intermediate is currently down by some 1% after falling from a high of $71.63 and printing a low of $69.24 so far. 

The drop came after the Federal Reserve on Wednesday raised interest rates as expected by 25 basis points and said more hikes are likely on the way. However, a clouded outlook due to the risks associated with the banking sector troubles is weighing on the oil price also. Additionally, US Treasury Secretary Janet Yellin warned that the United States government will not automatically insure all deposits in future bank rescues.

Meanwhile, the rise in US oil inventories was seen in the report from the Energy Information Administration. There was a rise of 1.1-million barrels in stock the prior week vs. the estimate of a 1.8-million barrel drop. 

Analysts at TD Securities argued that the spring is coiled in energy markets. ´´While CTA short acquisitions helped to fuel downside before a technical break catalyzed a large-scale stop-out, buying activity is unlikely to gain steam until WTI crude prices break the $78.50/bbl range,´´ the analysts argued.

´´With every single trend indicator on our screen already pointing to the downside, selling activity has run out of steam and algos stand ready to lift some offers. Strong crack spreads associated with refinery outages dampening supply and resilient demand could potentially act as a catalyst.´´