WTI crude oil traded at the highest price since October 2014
WTI crude oil traded at the highest price since October 2014 this Wednesday, rising above the $87 a barrel mark as worries continue to grow over shortages in supply and political unrest. The latest gains result from an outage on a pipeline in Turkey, which transports oil from Iraq, and geopolitical instability, following a rocket attack in the UAE, attributed to the Yemeni Houthi movement, and growing alert over a possible Russian attack in Ukraine. Supply has been tight for a while, as global demand continues to bounce back and OPEC+ member countries so far failing to reach a previously agreed increase in production. Against such background, the latest developments are an unwelcome addition, exacerbating pressure on already tight markets and creating scope for further oil price increases.
The US dollar is holding firm during early Wednesday trading, staying close to the high of the previous session. The greenback is finding support amidst rising bond yields and a repricing of investor expectations over the timing and pace of the Federal Reserve’s tightening of fiscal policies. While until recently expectations were for three rate hikes in 2022, the consensus in the markets now points at four increases this year, with the first likely to occur in March. The shift in investor expectations regarding the Fed’s stance is remarkable, compared to where we were barely a month ago, triggering a sell-off in bond and equity markets, with the Nasdaq index now approaching correction territory. The winner is likely to be the US dollar, which is expected to remain supported as rising consumer prices and a hot labour market create scope for further hawkishness from the Federal Reserve.
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