|

WTI plummets due to global rate hike fears, worldwide economic slowdowns woes

  • Central bank rate hikes, led by BoE, stoke fears of diminished oil demand.
  • WTI falls despite recent OPEC+ output cuts and surprise dip in US crude inventories.
  • Traders shift focus to China’s upcoming factory activity data amidst concerns over an economic slowdown.

Western Texas Intermediate (WTI), the US crude oil benchmark, plummeted more than 3% after more central banks led by the Bank of England (BoE) raised interest rates, which weigh on growth, suggesting less demand for oil. At the time of writing, WTI is trading at $69.28 per barrel after hitting a daily high of $72.61.

Crude oil tumbles over 3% as central banks tighten, and China’s economy weakens

Investors sentiment remains fragile, though shifted slightly positive, as US equities trade mixed. WTI erased Wednesday’s gains. Increased concerns over an economic slowdown in China weigh on Oil prices, despite the crude output cuts foreseen by OPEC+, as seen in the latest rate cuts implemented by the People’s Bank of China (PboC).

Aside from this, the BoE raised rates by 50 bps, dampening the economic outlook in the UK., as higher rates could slow economic growth.

In the meantime, the US Federal Reserve (Fed) Chair Jerome Powell concluded its first-half testimony before the US Congress, maintaining its neutral stance, reiterating that two interest rate increases are still on the table.

Nevertheless, traders seem to ignore the latest Fed dot plots revealed last week, as shown by the CME FedWatch Tool, as they only expect one additional increase in July of 25 bps as odds lie at 76.9%.

A US Energy Information Administration (EIA) report revealed that crude inventories fell by 3.8 million barrels last week to 463.3 million, below analysts’ expectations for a 300,000-barrel rise.

Meanwhile, WTI traders’ focus shifted towards releasing China’s factory activity next week, which could shed some light on the strength of China’s economy.

WTI Technical Levels

WTI US OIL

Overview
Today last price69.35
Today Daily Change-3.00
Today Daily Change %-4.15
Today daily open72.35
 
Trends
Daily SMA2070.87
Daily SMA5073.07
Daily SMA10074.49
Daily SMA20077.96
 
Levels
Previous Daily High72.7
Previous Daily Low70.81
Previous Weekly High72.02
Previous Weekly Low66.95
Previous Monthly High76.61
Previous Monthly Low64.31
Daily Fibonacci 38.2%71.98
Daily Fibonacci 61.8%71.53
Daily Pivot Point S171.21
Daily Pivot Point S270.06
Daily Pivot Point S369.31
Daily Pivot Point R173.1
Daily Pivot Point R273.85
Daily Pivot Point R374.99

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

GBP/USD bounces off lows, back above 1.3200

After bottoming out near 1.3160, GBP/USD manages to regain a bit of shine and reclaim the 1.3200 mark and beyond at the end of the week. Stronger-than-expected UK Retail Sales data seem to be helping the British Pound limit its losses, while the chaotic UK political environment keeps the bulls at bay for now.

EUR/USD looks consolidative around 1.1460

EUR/USD stages a modest rebound after slipping to a three-month low below 1.1420 at the end of the week. That said, the pair now looks to consolidate humble gains just above 1.1460 despite growing uncertainty surrounding the next round of US-Iran negotiations, which keeps the US Dollar’s downside contained.

Gold slips back to six-day lows, targets $4,100

Gold retreats for the third consecutive day on Friday, eroding gains seen in the first half of the week and approaching the key $4,100 mark per troy ounce. Indeed, the precious metal continues to face headwinds from the Fed's hawkish stance and renewed uncertainty surrounding the next round of US-Iran negotiations.

Breaking: Iran closes the Strait of Hormuz amid ceasefire deal violation
Iran says it is closing the Strait of Hormuz after accusing the United States (US) and Israel of violating the ceasefire. According to Iran, the decision came over the continued Israeli strikes in Lebanon. The Iranian Revolutionary Guard Corps Navy issued a warning to all vessels: "Do not approach the Strait of Hormuz; otherwise, your security will be jeopardized."
The Iran war didn't break the US economy, but what happens next?

Nearly four months after the start of the Iran war, the US economy remains remarkably resilient. While the conflict initially triggered a severe disruption to global energy markets and a sharp rise in Oil prices, recent diplomatic progress between Washington and Tehran has eased concerns about a prolonged supply shock.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.