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Oil Down 2% After Wall Street Bust and Ahead of Fed Rate Decision

CommoditiesJan 24, 2022 04:26PM ET
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© Reuters.

By Barani Krishnan

Investing.com - Oil prices fell more than 2% Monday as worries about the first impending U.S. rate hike in two years halted a rally that had carried on for five weeks with little more than a few stops.

Crude futures were down as much as 3% earlier in the day, joining stock markets melting down on fears that the Federal Reserve might be more aggressive than thought when it issues its first policy statement on Wednesday with regards to a rate hike after the Covid outbreak.

Even after stocks rebounded, oil remained lower.

The West Texas Intermediate benchmark for U.S. crude settled down $1.83, or 2.2%, at $83.31 per barrel. WTI earlier fell to $81.92.

London-traded Brent, the global benchmark for oil, settled down $1.62, or 1.8%, at $86.27 per barrel. Brent earlier fell to $84.22.

A similar dump happened in oil on Friday, with WTI losing as much as 5% at the session low. But a turnaround before the close that saw it closing off the lows.

This time though, the mood remained bearish though analysts weren’t sure if it would remain that way.

“It's been a remarkable rally and there's nothing to suggest that prices are peaking,” Craig Erlam, analyst at online trading platform OANDA, said, referring to the near 20% gain accumulated by crude markets over the past five weeks. “It's just come a long way in a short period of time but the fundamentals continue to look bullish.”

Aside from OPEC+ data pointing to under-investments in production that are hurting output by the 23-nation oil exporters’ alliance, crude prices are also supported by the geopolitics revolving around the potential war in Ukraine. 

The Fed is tightening its balance sheet and hiking rates left at almost zero since the Covid-19 outbreak. In the interim period, the central bank  has provided a stimulus of more than $2 trillion via bond and asset buying that combined with trillions more in federal pandemic aid has taken U.S. inflation to 40-year highs.

The selloff in  stocks also coincides with a soft patch of fourth-quarter earnings for U.S. companies. The resultant effect has creamed Wall Street’s highly-prized Big Tech sector, with the Nasdaq index that used to be the darling of investors hitting near bear market territory at one point Monday with a loss of 19% from November record highs.

Oil Down 2% After Wall Street Bust and Ahead of Fed Rate Decision
 

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Comments (7)
Mehdi Shahrjerdi
Mehdi Shahrjerdi Jan 24, 2022 3:40PM ET
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Good
Maxamud Afey
Maxamud Afey Jan 24, 2022 2:44PM ET
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5000
Maxamud Afey
Maxamud Afey Jan 24, 2022 2:44PM ET
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hallo
Richard Saunders
Richard Saunders Jan 24, 2022 2:21PM ET
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Whenever oil stays down, wars magically appear from nowhere. Oh look, Ukraine!! Crazy coincidence, eh?
Mark McMillan
Mark McMillan Jan 24, 2022 1:49PM ET
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oil still has a ways to run before dropping back. Markets are down very heavy today and oil and many other commodities have gone down with it. OPEC will keep adjusting to make top dollar per barrel and that you can bet on.
Scott Espeseth
Scott Espeseth Jan 24, 2022 1:37PM ET
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No...when Russia invades and Ukraine attacks Nordstream2 it will skyrocket.
Andrew Ulferts
Andrew Ulferts Jan 24, 2022 1:37PM ET
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That will never happen. Never.
Zoran Alijevic
Zoran Alijevic Jan 24, 2022 1:37PM ET
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that's natural gas
Christopher Jenkins
Christopher Jenkins Jan 24, 2022 1:37PM ET
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Andrew Ulferts what do you believe will never happen: Russia invading Ukraine or Ukraine attacking Nordstream2?
Andrew Ulferts
Andrew Ulferts Jan 24, 2022 1:37PM ET
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Neither will happen. Russia would not posture if they intended war, they would strike. Wars do not happen by lining up horseback against your enemy. They happen in the dead of night, clean and swift. Threats don’t lead to wars. Assasinations lead to wars. Unless the US carries them out, then we attack someone else and blame them.
Andrew Ulferts
Andrew Ulferts Jan 24, 2022 1:37PM ET
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Thanks. So far the driller I’m watching (ICD) is being bought heavily today. Earnings season coming up…..
Christopher Jenkins
Christopher Jenkins Jan 24, 2022 1:35PM ET
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Tight supply coupled with what is increasingly looking like war in Ukraine (and Putin potentially weaponizing oil exports when the west retaliates with sanctions) suggests to me that oil will rise in the short/mid term.
Andrew Ulferts
Andrew Ulferts Jan 24, 2022 1:35PM ET
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I don’t see war coming. I see politics.
 
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