Crude Down Sharply As Fears Rise On Fed Hiking & China Economy

Sentiment in commodity markets was impacted significantly on Tuesday by comments from Fed officials that the central bank may not be done tightening. The resultant increase in the dollar also weighed on prices (USD index rose 0.3%). Weak September exports from China also impacted the complex despite stronger imports of certain commodities including crude. Oil prices fell over 4% to levels not seen since late August.

• WTI fell below $80/bbl in late Asian trading and the pace of decline accelerated after FOMC member Kashkari’s comments that it would be better to overtighten than not do enough and that inflation is yet to be contained. FOMC’s Bowman also said she expects the Fed will have to hike further. WTI is now down 4.6% to $77.13 after breaking through support at $80.20, $78.51 and $77.74. This has opened up $77.03, August 24 low, which it is now approaching and is followed by $75.47, 24 July low.
• Brent is down 4.4% to $81.41/bbl. It broke through key support at $82.20, 6 October low, which is a bearish development. It also cleared $81.62. Next level to watch is $81.02, 24 August low.
• On the supply side Russia is shipping crude at its highest level in over four months despite its commitment to cut 300kbd, according to Bloomberg. Also the escalation of tensions in the Middle East hasn’t impacted flows. But stocks seem to be building in the US with the latest API data showing inventories up 11.9mn, according to those familiar with the data.
• The US EIA has revised down its 2024 Brent forecast by 1.8% to $93.24/bbl due to an expected increase in supply but demand should also be stronger.