Crude Oil Price Eases After Solid Rally as US Dollar Eyes the Fed Ahead. Higher WTI?

July 26, 2023 11:16 PM +07:00

Crude Oil, WTI, Brent, US Dollar, China, AUD/USD, CPI, RBOB Crack Spread - Talking Points

  • WTI crude has softened as markets jockey for position leading up to the Fed
  • APAC equities are mixed as details of China’s stimulus measure remain opaque
  • The RBOB Crack spread might be saying something. Will WTI trend north?

WTI crude oil slightly as markets competed for position ahead of the Fed meeting. - Crude oil eased on Wednesday after ratcheting up solid gains to start the week as markets look to the Federal Open Market Committee (FOMC) meeting later today.

Interest rate markets and economists are anticipating a 25 basis point hike but the post-decision press conference will be watched closely for clues on the Fed’s rate path going forward.

Treasury yields and Wall Street equity index futures are little changed as the suspense builds for today’s FOMC.

Asia-Pacific (APAC) stock markets

Risk assets in general were on the backfoot going into the European session. APAC equities have had a mixed day with Chinese stocks giving up a notable portion of yesterday’s gain.

Markets appear to be waiting for clarification from Beijing on the exact nature of stimulus measures alluded to at the Politburo meeting over the weekend.

A bright spot has been the tech-laden KOSDAQ which added more than 1.5% today.

AUD price situation

Australia's S&P/ASX 200 also saw modest gains after inflation gauges there revealed an easing of price pressures. It has led to hopes that the RBA may not be as hawkish at its meeting next Tuesday.

Headline Australian CPI was 6.0% year-on-year to the end of June, missing forecasts of 6.2% and against 7.0% previously.

AUD/USD collapsed to trade under 0.6750 but has since recovered. Other currency pairs have seen little price action and spot gold remains above US$ 1,960 at the time of going to print.

Overnight, the American Petroleum Institute (API) inventory report showed a drop of -1.319 million barrels for the week ended July 21st. Later today the official Energy Information Agency (EIA) data will reveal the change in US stockpiles for the same period.

The RBOB Crack Spread may be showing something. Will WTI oil prices continue to move up?

Potentially lending some support to black gold is the RBOB crack spread that has ticked up again this week. The RBOB crack spread is the gauge of gasoline prices relative to crude oil prices and reflects the profit margin of refiners.

The WTI futures contract is nearing US$ 79 bbl while the Brent contract is a touch above US$ 83 bbl.

Aside from the FOMC rate decision, the US will also see a series of housing data.


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