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WTI selloff intensifies amid growth concerns ahead of FOMC meeting

By Daniela Hathorn

10:29, 3 May 2023

Blue oil drums stacked in a warehouse in Indiana, U.S
Blue oil drums stacked in a warehouse in Indiana, U.S - Source: getty images

Crude oil continued to sell off in Tuesday’s session with both US and Brent crude finishing the day dropping over 5%. Concerns about growth are front and centre as traders await the FOMC’s latest monetary policy decision this evening. US crude (WTI) is closing in on the $70 mark, its lowest level since March 27th, as it re-enters the SPR replenishment range ($72-$63).

US Crude (WTI) daily chart

US Crude (WTI) daily chartPhoto: Source: tradingview

There is little doubt in markets that the Fed will hike another 25bps at its May meeting this evening and so that is keeping risk appetite subdued. Add to that the fact that the ongoing US banking crisis has traders worried about stability in the banking system, and also the latest numbers from China, one of the top crude importers in the world, showing sluggish manufacturing activity. The European Central Bank (ECB) is also expected to hike rates on Thursday which will put further pressure on European companies and the spending capacity of consumers. 

Natural Gas

1.95 Price
+1.620% 1D Chg, %
Long position overnight fee -0.4005%
Short position overnight fee 0.3786%
Overnight fee time 21:00 (UTC)
Spread 0.0050

Oil - Crude

85.07 Price
-0.080% 1D Chg, %
Long position overnight fee 0.0108%
Short position overnight fee -0.0327%
Overnight fee time 21:00 (UTC)
Spread 0.040


27.90 Price
-1.880% 1D Chg, %
Long position overnight fee -0.0202%
Short position overnight fee 0.0119%
Overnight fee time 21:00 (UTC)
Spread 0.020

Oil - Brent

89.76 Price
-0.050% 1D Chg, %
Long position overnight fee 0.0194%
Short position overnight fee -0.0414%
Overnight fee time 21:00 (UTC)
Spread 0.032

The demand forecast for crude remains weak because of these concerns despite falling inventories in the US. Expectations about the future growth potential in the US economy will be key to determine the momentum in crude oil, starting with the outcome of the FOMC meeting this evening. A hawkish fed may lead to renewed bullish momentum in the US dollar, with the potential to send WTI back towards the $68 mark. On the contrary, if traders perceive some weakness in the central bank’s ability to keep rates elevated throughout 2023, then the dollar is likely to reverse the recent gains as risk appetite potentially pushes WTI back above $75 per barrel.

Focus will also be on the latest jobs data from the US out this Friday as there is also a good potential for volatility out of that event, especially if the meeting this evening fails to provide any significant update or change to the policy outlook. 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided in this article is for information purposes only and should not be understood as investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents and has not been prepared in accordance with the legal requirements designed to promote investment research independence. While the information in this communication, or on which this communication is based, has been obtained from sources that believes to be reliable and accurate, it has not undergone independent verification. No representation or warranty, whether expressed or implied, is made as to the accuracy or completeness of any information obtained from third parties. If you rely on the information on this page, then you do so entirely at your own risk.

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