Forex News

04:12:36 16-06-2022

WTI oscillates around $116.00, downside looks likely on Fed’s mega rate hike announcement

  • Oil prices are trading lackluster after a two-day losing streak.
  • Fed’s mega rate hike announcement has sidelined the oil bulls.
  • Supply constraints will remain effective as no oil supplier could cover the truckload oil supply by Russia.

West Texas Intermediate (WTI), futures on NYMEX, is displaying back and forth moves around $116.00 after a vertical downside move. The black gold faced a sell-off after failing to overstep the psychological resistance of $120.00. The oil prices are expected to shift into a negative trajectory as the Federal Reserve (Fed) has underpinned lower growth forecasts for the coming quarters.

A rate hike by 75 basis points (bps) to fix the inflation mess quickly is going to shrink liquidity from the market. The corporate houses will access costly money from the commercial banks for investing in projects. The unavailability of helicopter money will compel the corporate houses to stick to ultra-filtered investment opportunities only.

Lower investment opportunities will worsen the unemployment rate and henceforth result in lower funds for disposal in the palms of the households. Also, it will lead to lower aggregate demand and eventually lower demand for oil.

Meanwhile, the resurgence of the Covid-19 in China has renewed fears of lower demand. Shanghai and Beijing in China have recently opened again after a two-month long lockdown period and the reversal of lockdown curbs will dampen the sentiment of the market participants towards the demand structure.

On the supply front, lower oil supply from Russia will continue to keep the oil bulls resilient. After the embargo on oil imports from Russia by the Eurozone, investors are worried over the fact which oil suppliers will cater to their whooping oil demand. The ongoing Eurogroup meeting is expected to discuss the same and may come out with a list of new oil suppliers.

 

News provided by the portal FXStreet
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