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The Federal Reserve accepted a total of $15.782 billion from 12 counterparties in its fixed-rate reverse repurchase operations.On April 1st, Federal Reserve Chairman Schmid warned on Tuesday that rising energy prices should not be assumed to have only a short-term impact on inflation, as inflation was already close to 3% even before the Iran war caused oil prices to surge, and the Feds progress toward its 2% inflation target has stalled. "I dont think we can be complacent about the risks to inflation expectations," Schmid said. He also noted that while most measures of medium- to long-term inflation expectations have remained stable, this offers little comfort. "Our task now is to take appropriate policy action to confirm these expectations." Schmid did not specify what policy measures he was referring to, but he opposed the Feds decision to lower interest rates twice last year. Last week, financial markets reflected a growing belief that rising oil prices might force the Fed to raise interest rates later this year to prevent inflation. However, this week, market sentiment has shifted to the view that the Fed will keep interest rates unchanged.On April 1st, Iranian President Pezechzian spoke by phone with European Council President Costa on March 31st to exchange views on the regional situation and the impact of the war on Iran. Pezechzian stated that the EUs silence on the crimes of the US and Israel was regrettable and contrary to its own human rights principles. He pointed out that Iran had no intention of attacking regional countries, but the US maintains military bases in some countries, and attacks against Iran are launched from these bases. Pezechzian emphasized that the current tensions in the Gulf and the Strait of Hormuz are caused by hostile actions, and the only way to restore normal order is to stop aggressive attacks. He also stated that the Strait of Hormuz is closed to ships of the aggressor and its allies, and any external intervention in this war under any pretext will have serious consequences.Federal Reserves Schmidt: He expects persistently high oil prices to have a "mild drag" on economic growth.Federal Reserves Schmid: We must continue to focus on the inflation target.

WTI sellers assault $87.00 as US President Biden contests OPEC+ ruling

Daniel Rogers

Oct 12, 2022 14:29

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WTI remains below the $87.00 support level as US President Biden expresses his displeasure with the decision by the Organization of the Petroleum Exporting Countries and its allies, including Russia, known collectively as OPEC+. Nevertheless, the bears remain cautious at the weekly low throughout the Asian session on Wednesday.

 

Reuters reported that US Vice President Joe Biden stated on Tuesday that "there will be consequences" for US-Saudi ties following OPEC+'s announcement last week that it will reduce oil production against US concerns. The news further reported that Biden's remark occurred a day after the influential Democratic senator Bob Menendez, chairman of the Senate Foreign Relations Committee, stated that the United States must immediately halt any cooperation with Saudi Arabia, including military sales. Notable is the fact that OPEC+ startled markets by declaring a two million-barrel-per-day output cut last week.

 

In addition to the OPEC+-agreed-upon supply cutbacks, the risk-aversion wave and the strengthening US Dollar Index (DXY) further weigh on commodities prices.

 

In spite of this, the DXY re-establishes a two-week high above 113.50 as higher US Treasury yields and hawkish Fed bets keep dollar investors optimistic ahead of today's Federal Open Market Committee (FOMC) Meeting Minutes.

 

The International Monetary Fund's (IMF) most recent economic forecasts may also impose downward pressure on the price of black gold. Tuesday, the IMF dropped its global economic growth forecast for 2023 from 2.9% in July to 2.7%, citing pressures from rising energy and food prices and interest rate hikes as the primary reasons for the change. Notable is that the Washington-based institute maintained its 3.2% growth prediction for 2022, compared to 6.0% for 2021.

 

In conclusion, the risk-averse sentiment and optimism for an easing of the supply constraint weigh on the price of black gold prior to the private weekly inventory data from the American Petroleum Institute (API), which was previously -1.77M.


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