WTI Prices Rebound on US Intervention and Chinese Proposal.

22 במרץ 2023

What can we expect from Oil today?
The Fed anticipated 25bps increase in interest rates from 4.75% to 5.00% could affect the oil market. A stronger USD from higher rates may cause a decrease in demand and push prices down. If the Fed signals a slower rate hike path, the USD may weaken, increasing demand and prices.

The price of WTI crude oil experienced a significant increase after finding support around $64 per barrel. This relief rally was driven by the US government's intervention in the ongoing banking turmoil, with US Treasury Secretary Janet Yellen indicating a willingness to provide deposit guarantees to small banks if necessary. Additionally, a joint statement issued during Chinese President Xi's visit to Moscow proposing a 12-point plan for de-escalation and ceasefire in Ukraine was welcomed by Russian President Putin. However, it was noted that the plan lacked details on how to end the conflict, and the West and Kyiv needed to be briefed.

These positive developments have increased investor risk appetite, leading to a surge in WTI prices towards $70 per barrel. In OPEC news, Russia has committed to maintaining a 500,000 barrels per day oil production cut until June 2023, as efforts to keep oil prices elevated have been unsuccessful. Some oil traders and hedge funds have argued that the current downturn in oil prices is speculative and not based on fundamentals, and it will be important to observe how OPEC addresses this issue.