Crude Oil Prices Face Competing Themes: Cooling Bank Volatility & Fed Policy Bets

Crude Oil Prices

WTI crude oil prices traded relatively flat over the past 24 hours in an overall volatile trading session. On the one hand, reports crossed the wires that First Republic Bank was poised to receive emergency aid to the tune of 30 billion from major lenders. But, because of cooling woes in the financial sector, Treasury yields were pushed higher. The latter speaks to traders pricing out anticipated rate cuts from the Federal Reserve later this year because of last week’s Silicon Valley Bank collapse. Market-implied policy rates have added back about 50 basis points in tightening for the 3-month horizon. That would leave rates around 5% instead of the 4.5% seen earlier in the week. As such, sentiment-linked crude oil faced opposing fundamental forces. On the one hand, risk appetite improved. On the other hand, a Fed that can continue tightening could bode ill for future oil demand. Looking at the remaining 24 hours, eyes turn to the University of Michigan Sentiment data at 14:00 GMT. A softer outcome speaking to worried consumers may renew selling pressure for WTI.

Crude Oil Technical Analysis – Daily Chart

On the daily chart, crude oil confirmed a breakout under a Bearish Rectangle chart formation. That may open the door to downtrend resumption. Key support seems to be a wide range between 61.69 and 65.60. The latter was established in May 2021. On the other hand, turning higher would place the focus on the December low at 70.10, which may hold as resistance.

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