WTI rallies above $82 on risk appetite

WTI crude oil gained 2.07% on Thursday as the US dollar declined. WTI is trading at $82.23 per barrel at the time of writing. Despite a potential hawkish retreat, investors respond favourably to the Federal Reserve’s decision to maintain interest rates unchanged.

The Fed reiterated its commitment to reducing excessive inflation while maintaining rates in the range of 5.25% to 5.50%. Investors responded favourably to the move by Jerome Powell and Fed’s policymakers despite this, even though they still run the risk of a potential hawkish retreat by the Fed. Powell claimed that tighter monetary conditions were maintained by higher rates at the long end of the curve.

However, because restrictive policies are perceived as a threat to dent demand, rates remained high due to speculations of additional rate hikes, which increased demand for oil. Early in the North American session on Thursday, the Bank of England decided to hold rates despite expectations that it would reach peak rates in the face of a bleak economic outlook. The recent PMI data is capping WTI’s surge.

The contractionary/expansionary threshold was broken by the ISM Manufacturing PMI in October, indicating a slowdown in the economy. This reflects some of China’s problems following the disclosure by Caixin and the National Bureau of Statistics (NBS) that business activity in the manufacturing sector is still at recessionary levels.

Thursday also saw a nearly 3% increase in oil futures trading. At its most recent meeting on Thursday, the Bank of England kept interest rates at 15-year highs of 5.25%, marking the second consecutive month of stable rates following 14 consecutive hikes. It made it clear that rate cuts are not something it anticipates happening anytime soon.

The question now is how long the BoE stays at its peak; it appears that, like many of its peers, it is finished with the tightening cycle.

As for supply, the world’s largest oil exporter, Saudi Arabia, is anticipated to reaffirm that it will continue to reduce its oil output by a voluntary million barrels per day through December. Investors are also keeping an eye on developments in the Middle East, which have heightened anxiety in the oil markets due to the possibility that a wider conflict may disrupt supplies throughout the region.