Potential Rate Hikes Weigh on Market
January 31, 2023
On Sunday, a US official said Israel appears to have been behind an overnight drone attack on a military factory in Iran. Iran claimed to have intercepted drones that struck a military industry target near the central city of Isfahan and said there were no casualties or serious damages. This initially had the market higher when it opened Sunday night as Middle East tension were high, but the market turned around and had a big selloff yesterday.
The march WTI crude oil contract settled down $1.78 at $77.74, the lowest level since January 11. The market moved lower in overnight trading and is still testing lower as we start today. The thought that the Fed and European central banks will be raising rates is currently weighing on the markets. The concerns about a recession are brought to light with rates expected to go up and that knocks some of the optimism about a soft landing and demand growth to the background for now. The market is getting a dose of reality and traders are taking profits after the price runup.
Also helping prices to selloff was the report of strong oil and refined products sales from Russia to Asia.
The Railroad Commission of Texas, which oversees the state’s oil and gas industries advised oil and gas pipeline operators to secure equipment and facilities after forecast for severe weather over the next several days. It issued the notice after the National Weather Service forecast wintery precipitation and ice accumulation across several parts of the states, the oil regulator advised the operators to secure all personnel, equipment, and facilities to prevent injury or damage, and monitor and prepare operation for potential impacts.
OPEC+ meets tomorrow and the expectation is that they will make no changes to production.