WTI weak as U.S. bank credit likely to tighten despite dovish Fed rate hike

2023-03-23 17:32:46

WTI oil prices rose to near $70.80 in early trading Thursday, with the bulls dominating for the fourth consecutive day. In this case, WTI oil prices consolidated near the one-week high reached the day before yesterday, close to the key downward resistance line since March 7. Although the Federal Reserve raised interest rates dovishly, the U.S. dollar weakened sharply, providing support for oil prices. But U.S. Treasury Secretary Yellen told lawmakers on Wednesday that she had not considered or discussed providing "comprehensive insurance" for U.S. bank deposits without congressional approval, and concerns over the banking sector led to a sharp drop in New York stocks and weighed on oil prices.

The Federal Reserve raised interest rates by 25 basis points overnight as scheduled, but Chairman Powell said that the pressure on the banking industry could trigger a credit crunch that would have a "significant" impact on the economy. One more rate.

In addition, the latest data from the U.S. Energy Information Administration EIA showed that U.S. crude oil inventories unexpectedly rose to the highest level in 22 months last week. Crude inventories rose by 1.117 million barrels in the week to March 17 to 481.2 million barrels, the highest since May 2021. Analysts had expected a decline of 1.565 million barrels. The EIA data also showed that total U.S. exports of crude oil and petroleum products hit a new high of nearly 12 million barrels per day, far higher than the supply levels of any other country. Investors need to be wary of the possibility of oil prices returning to their downtrend.

"The Fed meeting pointed to economic risks, while higher-than-expected U.S. crude stockpiles also dampened some optimism about the demand outlook," said IG market strategist Yeap Jun Rong. But Yeap added that a weaker dollar has been driving oil's rebound As a bright spot, oil prices still have some upside.

"Despite all the pessimistic rhetoric about the outlook for U.S. oil production growth in 2023, cost inflation being exaggerated and lower capital spending, the latest EIA weekly report confirms U.S. oil's key role to global markets," Citi analysts said in a note.

Pierre Andurand, a hedge fund manager at Andurand Capital, which focuses on crude oil investments, said he was bullish on oil prices rising to $140 by the end of the year because the banking crisis triggered a drop in oil prices that was speculative. However, Andurand pointed out that electric vehicles will eventually sap gasoline demand and lead to slower oil demand growth for many years to come. Oil demand will peak by 2023, he said.

In this trading day, it is necessary to pay attention to the interest rate decision of the Bank of England, changes in the number of people filing for unemployment benefits in the United States, and the annualized total number of new home sales after the seasonal adjustment in February in the United States. Pay attention to the market's further interpretation of the interest rate decision of the Federal Reserve and related news from the European and American banking industries.

CME's latest crude oil trading data

Preliminary data from the CME Group crude futures market showed traders increased their open interest for a second straight session on Wednesday, rising by nearly 24,000 contracts on the day. Volume, on the other hand, fell for the third straight session, down about 128,800 contracts on the day.

WTI prices extended their rally on Wednesday amid rising open interest, suggesting further upside in the near term. In this case, the commodity appears to be under pressure as long as it holds just above the February/March highs of $80.00.

WTI Oil Price Technical Analysis

The latest rise in WTI oil prices may be related to the price's continued breakout of the one-week horizontal resistance (currently support) as well as the 50-SMA. MACD signals and relative strength indicator (14) bullish not overbought may increase WTI oil price upward bias.

Therefore, WTI oil price bulls appear to be ready to break above the aforementioned resistance line, which is around $70.85 at press time. However, the seven-week horizontal area around $72.50-70 appears to be acting as a stiff resistance for the bulls.

If WTI oil prices break through $72.70, the low at the end of February and the 100 simple moving average of $73.85 will be the last line of defense for bears.

In addition, the 50 simple moving average and the one-week horizontal support level, namely the previous resistance level of $69.85, prevented WTI oil prices from falling in the short term.

From here, $68.00 and $66.50 are likely to attract bears, before WTI oil prices will approach the key monthly level of $64.40, which is also the lowest level since December 2021.

WTI oil price 4-hour chart

JRFX shares news information and professional technical analysis on foreign exchange, spot gold or crude oil every trading day. Follow us so as not to miss the market focus of the day and grasp the trading market in time.

JRFX reminds you: the market is risky, and investment needs to be cautious. This article does not constitute personal investment advice. Please choose corresponding investment products according to your own financial and risk tolerance, and do a good job in corresponding risk control.

About JRFX

· 12 years of financial market experience, the choice of more than 4 million customers, one of the most respected foreign exchange brokers in the world

· Provide 50+ trading products, including foreign exchange, spot gold, crude oil, stocks, indices, cryptocurrencies, etc.

· Three trading accounts to meet the investment needs of different customers

· Zero commission, low spread, leverage up to 1:1000

· You can open an account with a minimum deposit of 100 US dollars only

· 24-hour customer service

Online Service Create Account MyJRFX Download
Online Service