{"id":57546,"date":"2023-03-09T16:52:57","date_gmt":"2023-03-09T14:52:57","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=57546"},"modified":"2025-10-17T09:43:43","modified_gmt":"2025-10-17T06:43:43","slug":"powells-remarks-impede-wtis-ascend","status":"publish","type":"post","link":"https:\/\/www.ironfx-id.com\/fa\/powells-remarks-impede-wtis-ascend\/","title":{"rendered":"Powell\u2019s remarks impede WTI\u2019s ascend"},"content":{"rendered":"

This week WTI<\/strong> saw its winning snap after the head of the Federal Reserve<\/strong> opened the door for a larger magnitude rate hike<\/strong> in the upcoming March meeting, sending energy traders<\/strong> back to the drawing board. Also capping potential gains<\/strong> for oil<\/strong>, were China\u2019s<\/strong> modest growth targets<\/strong> for the year ahead which downplayed<\/strong> optimistic bets in regards to the nation\u2019s reopening<\/strong>. In this report we aim to shed light on the catalysts<\/strong> driving WTI\u2019s price<\/strong>, assess its future outlook<\/strong> and conclude with a technical analysis.<\/strong><\/p>\n\n\n\n

Powell\u2019s hawkish remarks strike fear in markets<\/strong><\/h2>\n\n\n\n

Yesterday, Fed Chair Powell<\/strong> testified before the Senate Banking Committee<\/strong> and his hawkish remarks<\/strong> reverberated across the markets. The Chair<\/strong> cautioned that interest rates<\/strong> are likely to head higher<\/strong> than what central bank policymakers<\/strong> had anticipated, opening in sense the door for a larger magnitude rate<\/strong> hike in the upcoming March meeting<\/strong>. “The data from January on employment, consumer spending, manufacturing production, and inflation have partly reversed the softening trends<\/strong> that we had seen in the data just a month ago” stated the Chairman<\/strong> and added \u201cif the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes<\/strong>\u201d. The Chair<\/strong> has also underscored the bank\u2019s resolute commitment<\/strong> to its dual mandate obligations<\/strong>, ensuring price stability<\/strong> and facilitate favorable employment market<\/strong> conditions and through his comments, analysts picked up that he appears to be willing to sacrifice growth and employment<\/strong> in exchange<\/strong> for price stability<\/strong>, since the US labour market<\/strong> has consistently defied expectations<\/strong> for deterioration over the past few months. As the bank acknowledged that it is still far away from its goal and a higher terminal rate is now a reality<\/strong>, the markets rushed reassess their outlooks and a shift in projections<\/strong> took place in the swaps markets. A volatile reaction<\/strong> was also observed in the energy markets<\/strong>, as WTI fell sharply<\/strong> after the Chair\u2019s comments, since the prospect<\/strong> for more hikes<\/strong>, strengthened<\/strong> the dollar<\/strong> and since crude is denominated in USD<\/strong>, a stronger greenback<\/strong> would lead to oil<\/strong> being more expensive<\/strong> for overseas buyers. Therefore ,that inadvertently caps demand for oil<\/strong> and hence that contributes to the fall<\/strong> of oil prices.<\/p>\n\n\n\n

China\u2019s trade surplus widens from slump in imports<\/strong><\/h2>\n\n\n\n

Furthermore, China\u2019s Trade Balance figures released on Tuesday implied a strengthening<\/strong> of the Chinese economy<\/strong> as the nation\u2019s trade surplus exceeded expectations<\/strong>. More specifically, the actual figure stood at 116.9B higher than the 81.08B which was widely forecasted and also significantly higher than last month\u2019s 78B result. Despite this, imports<\/strong> for China on a Year-on-Year basis were significantly lower than expecte<\/strong>d, with the actual figure being reported at -10.2%, whereas the expected figure was -5.5%. Exports<\/strong> on the other hand, exceeded expectations<\/strong> falling less than originally anticipated. The slackening of imports from China, the largest oil consumer in the world, could therefore be indicative of a possible reduction in demand for crude<\/strong>, which could potentially affect negatively WTI prices<\/strong>. Last week\u2019s favorable Composite PMI data provided support for the commodity and lifted optimism<\/strong> in energy traders<\/strong> assessments that expect a strong rebound<\/strong> from year\u2019s long suppressed economic activity<\/strong>. Furthermore, the Non-Manufacturing PMI<\/strong> data for February was reported at 56.3, higher that the 55.0 base case expectations, which boosted further confidence<\/strong> that the reopening of the Chinese economy<\/strong> and production levels could reach pre-covid levels faster than expected<\/strong>, supporting oil <\/strong>prices.<\/p>\n\n\n\n

Downplayed growth targets from China hurt crude<\/strong><\/h2>\n\n\n\n

It should also be noted that the Chinese National People\u2019s congress<\/strong> is still in session throughout this week<\/strong> and has been addressing key policy issues<\/strong> within the Chinese mainland and more importantly has shed valuable clues for energy traders<\/strong> in regards to the country\u2019s forward looking plans<\/strong>. According to news releases, Chinese officials have set an economic growth target rate of 5%<\/strong> for the year 2023 which is substantially different<\/strong> than what analysts<\/strong> had previously anticipated<\/strong>. Last week, an exclusive report from Reuters<\/strong> showcased that Chinese officials\u2019 growth forecasts range between 5% to 6%, with more than half of the sources placing their forecasts<\/strong> near the upper bound of 6%,<\/strong> whereas the rest varying between 5% and 5.5%. Therefore, analysts expect the deviation<\/strong> to impact negatively<\/strong> the outlooks<\/strong> of crude traders, since a \u201cmodest\u201d growth target of 5% can falls below expectations<\/strong>. Overall, a less optimistic<\/strong> increase in demand<\/strong> for crude <\/strong>could hurt<\/strong> oil prices<\/strong> and lead to their fall to lower ground.<\/p>\n\n\n\n

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WTICash 4H Chart<\/strong><\/strong><\/strong><\/strong><\/h3>\n\n\n\n
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