WTI oil slides below $67 as Ukraine war escalates, Fed holds rates
As of writing, WTI price was $66.90.
The benchmark West Texas Intermediate (WTI) crude oil began the week with a drop below $67.00 per barrel.
As of writing, WTI has lost 2.4% since the start of the day, trading at $66.90.
The primary driver of this drop is the intensification of hostilities in Ukraine, where cities faced the largest airstrike in three months this past Sunday. Russia continues its offensive in Northern and Eastern Ukraine, amassing forces in the Kursk region, with approximately 16,000 soldiers reportedly sourced from North Korea.
According to CNN News, U.S. President Joe Biden authorized Ukraine on Sunday to use Army Tactical Missile Systems (ATACMS) for strikes deep into Russian territory, aiming to preempt a new phase of the conflict.
Macroeconomic factors behind the decline
Oil prices are also under pressure due to the growing possibility that the U.S. Federal Reserve (Fed) might pause rate cuts in December.
Fed Chair Jerome Powell tempered expectations of imminent rate reductions, citing the economy's resilience, a strong labor market, and ongoing inflationary pressures. “The economy shows no signs indicating we need to rush into cutting rates,” Powell stated.
According to the CME Watch tool, the percentage of traders expecting a 25-basis-point rate cut on December 18 has dropped to 61.6%, while 38.4% believe rates will remain unchanged.
Additional Market Concerns
Bearish sentiment in the crude oil market is further fueled by concerns over weakening demand in China. A recent stimulus package worth 10 trillion yuan introduced by the Chinese government does not include direct support measures, amplifying market anxiety.
