WTI: Bulls are in the market amid risk appetite, focus is on FOMC

• Crude rises as investors regain some confidence in the economic outlook
• WTI traders are eyeing the Fed as the next catalyst.

WTI (West Texas Intermediate) It is up 2.4% towards the close on Wall Street and rebounds from a low of $66.96 to a high of $69.72 as investors have regained some confidence in the economic outlook following the Credit Suisse bailout over the weekend.

Meanwhile, the Federal Reserve will announce the interest rate decision on Wednesday, after its two-day meeting began on Tuesday, in which markets are pricing in the likelihood that it will end with a rate hike of a quarter point. Swiss authorities have helped calm market fears of a prolongation of the banking crisis, and crude oil prices have risen 3.9% since the start of the week, after falling 13% last week. Black gold has also rallied as investors rushed back into riskier assets following fresh assurances from regulators about support for the US banking sector.

The possible extension of FDIC coverage to all deposits eased fears of further bank failures. Support was aided by other supply-related issues. TANZ Bank analysts explained that “Russia extended its 500 kb/d crude production cut until June.”

The decision was based on current market conditions, according to Deputy Prime Minister Alexander Novak. And this despite the fact that tanker monitoring data shows little sign of a reduction in trade. General sentiment remains bullish, with major traders saying oil fundamentals are getting stronger. However, the banking crisis could affect supply more than demand. US shale production is most threatened by tightening credit conditions from US regional banks.”

In the meantime, we have the pair of weekly US oil inventory reports, starting with the API Trade group today, followed by the official EIA inventory data on Wednesday. The API has shown a large accumulation against the expected reduction.

Other than that, traders are unlikely to get too positioned one way or the other before the Federal Reserve makes its long-awaited interest rate announcement tomorrow. The central bank is still expected to keep trying to rein in the US economy to reduce inflation, despite the banking crisis and fears it could spark a demand-destroying recession.

The Fed is expected to raise and push the federal funds rate to 4.75%-5.00%. The post-meeting statement will emphasize that the Fed has not finished tightening its monetary policy yet.

TD Securities analysts they say officials are likely to stress a more uncertain economic environment.
Treasuries will react to messages from the Fed about future hikes and the dot chart. Any suggestion that the Fed will halt hikes due to stability concerns could lead to a market overreaction,” the analysts said, noting that “messaging and the dot chart will be key.” Our base case is aggressive line, posing the risk of persisting voltage from the STIR(analysis of short-term interest rates)”.