By Barani Krishnan
Investing.com - The invincible oil market can fall, too, as Monday’s trade showed. The question is will it stay down or recover substantially by the close, as it did on Friday?
Crude futures were down 3% in the latest session, joining stock markets melting down on fears that the Federal Reserve might be more aggressive than thought when it issues its first policy statement on Wednesday with regards to a rate hike after the Covid outbreak.
The Fed tightening of its balance sheet and the impending rate hike comes after a stimulus of more than $2 trillion provided by the central bank via bond and asset buying, and coincides with a soft patch of fourth-quarter earnings for U.S. companies. The resultant effect has creamed Wall Street’s highly-prized Big Tech sector, with the Nasdaq index that used to be the darling of investors hitting near bear market territory with a loss of 19% at one point Monday.
On the oil front, the West Texas Intermediate benchmark for U.S. crude was down $1.88, or 2.2%, at $83.26 per barrel by 1:00 PM ET (18:00 GMT).
London-traded Brent, the global benchmark for oil, was down $1.71, or 2%, to $85.37 per barrel. Brent earlier fell to $84.22.
A similar dump happened in oil on Friday, with WTI losing as much as 5% at the session low before a turnaround that saw it close less than 1% down.
“It's been a remarkable rally and there's nothing to suggest that prices are peaking,” Craig Erlam, analyst at online trading platform OANDA, said, referring to the near 20% gain accumulated by crude markets over the past five weeks. “It's just come a long way in a short period of time but the fundamentals continue to look bullish.”
Aside from OPEC+ data pointing to under-investments in production that are hurting output by the 23-nation oil exporters’ alliance, crude prices are also supported by the geopolitics revolving around the potential war in Ukraine.