Americas News
Oil Returns To Bear Territory As Traders Worry Yet Again About Rate Hikes
After a brief session of gains based on vague hopes of high seasonal demand, oil traders on Wednesday reverted to their bearish stance, stoked by expectation that the U.S. Federal Reserve will hike interest rates yet again.
The expectations stemmed from U.S. consumer prices rising in April, which analysts say raises the chance of the Fed taking action; also, in the previous session, John Williams, president of the New York Fed, complained that inflation is still too high and warned that the central bank could raise rates again.
Brent dropped $1.03, or 1.3 percent, to settle at $76.41 per barrel, while West Texas Intermediate fell $1.15, or 1.6 percent, to $72.56 per barrel.
Still, analysts remained somewhat optimistic about increased demand in the near future: Jay Hatfield, CEO of Infrastructure Capital Management, said, "We are forecasting that oil prices range from $75-$95 during 2023 based on fundamental supply and demand and that oil will rally as we head into the summer driving season."
It could be argued that demand is already robust, at least in the U.S.: the Energy Information Administration reported that gasoline inventories fell by 3.2 million barrels last week, much bigger than expectations for a 1.2 million barrel draw, and distillate stocks also declined.
By contrast and not to be overlooked, though, crude oil inventories rose by about 3 million barrels last week, due to another release from national reserves and a drop in exports.
Given that oil market fundamentals remain in relatively good shape despite schizophrenic trading, it fell upon ING to speculate what patterns trading could assume in the days and weeks to come.
Strategists Warren Patterson and Ewa Manthey said,"Sentiment clearly remains negative, which suggests that there could be some further downside in the near term, although, we would expect the market to find good support near the March lows of around US$70/bbl."
Patterson and Manthey predicted a market deficit in the second half of the year and remarked, "While sentiment is negative at the moment, the market is in oversold territory and our balance sheet still shows that the market will be in deficit over 2H23, which should drive prices higher."
