Economic conditions VS geopolitical concerns!
The US market on Tuesday opened lower as investors prepared for the FOMC announcement and economic projections. Federal Reserve Open Market committee's meeting starts today, and we will have the announcement, economic forecasts, and Fed chair Powell's press conference tomorrow after two days' meeting ends.
At the beginning of Tuesday's trading hours, Dow Jones Industrial Average fell 0.42%, S&P 500 lost 0.63%, while the Nasdaq Composite led the bears with 94.9 points, or 0.82% losses.
As a reaction, WTI also started to lose ground, as investors felt uncertain global economic conditions grow. This downward came after a short-term recovery seen yesterday to continue the overall slight downtrend of the past three weeks. Oil prices on Friday closed lower for a third consecutive week. Investors and traders have some doubts about demand and economic growth, even though both OPEC and IEA did not change their economic growth projections for 2023.
The main price driver of the last week were concerns over Iraq's Oil supply, Monthly reports of IEA, EAI, and OPEC, and contradictory news about China's quarantine conditions. China, which is the world's largest oil importer, has introduced new Covid lockdowns in several parts of the country, while in some other cities, removed the previously announced quarantines.
For the week ahead, the Oil market mainly depends on numerous central banks meetings, focusing more on FED meetings. Any aggressive rate hikes will push oil prices down and vice versa. Investors believe that in the current situation, with the sharper moves of the Federal Reserve, economic activities will ease more, which is fueling recession fears. The global economic slowdown and recession concerns will affect the oil demand outlook, putting pressure on oil prices. Even if the People's Bank of China did not change the prime interest rates early Tuesday, a day ago, they cut the repo rates by ten basis points to boost the stock markets, which helped the oil prices in the last 24 hours before Tuesday's US market open.
Ahead of tomorrow's FED statement, while a 75-basis point rate hike has been largely priced in by market participants, it may still pressure oil prices. With more hawkish policies, oil prices will likely express further downwards. On the other hand, global geopolitical concerns can prevent further and more severe reductions in the medium term.
From the technical point of view, WTI moves in a clear downtrend with following strong support at 80 and then 76 US dollars.
