Commodities Week Ahead: Oil in Sleepwalk Mode, Awaiting Fed
The three-day comatose mode for markets ahead of the Federal Reserve’s rate decision is on, with oil prices barely moving Monday amid debate on what the central bank would say about — rather than immediately do — with rates when it meets Wednesday.
Since the Fed skipped a rate increase in June for the first time since March 2022, speculation has been rife that this week’s meeting will produce the final hike for this year — despite projections showing there could be another before its final policy meeting on Dec. 13.
The Fed’s use of the most aggressive rate hikes in four decades to clamp down on inflation has produced excruciatingly slow results that have just started to yield after 16 months. Indeed, if the central bank stops with just one hike on Wednesday, risk-on appetite could flourish from traders expecting the next big thing: rate cuts. In such an environment, oil prices could spike, hurting growth and rolling back hard-won gains against inflation.
New York-based West Texas Intermediate, or WTI, was down 55 cents, or 0.7%, to $76.52 per barrel by 03:15 ET (07:15 GMT) Monday.
London-based Brent for September delivery also slid 55 cents, or 0.7%, to $80.33 per barrel.
Still, CMC Markets analyst Leon Li said he expects U.S. crude prices to eventually reach $80 a barrel again on a «seasonal demand rebound».
Analysts at National Australian Bank had a somewhat similar view, saying:
«While another Fed rate hike this week may drive some short-term price volatility, we expect tightening market conditions on OPEC's supply cuts and increasing market speculation of further stimulus in China to continue to push prices higher through 3Q23.”
Those bullish thoughts run contrary to the slashing of near-term price forecasts on
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