7th February 2024: West Texas Intermediate (WTI) crude oil was volatile on February 5, 2024, experiencing a sideways trend. After the opening in New York, a slight pullback was observed, but it subsequently recovered with a 1.71% increase.
Traders have been attentive to several variables that have influenced the price of WTI, such as the announcement of the U.S. monetary policy last week, announced macroeconomic indicators and conflicts between some countries in several regions.
To begin with, the possibility of a ceasefire in Gaza is shrouded in uncertainty, while tensions in the Middle East are raising concerns about possible disruptions in oil supply. Financial traders are affected by conflicting reports about a proposed pause in the fighting in Gaza, which would include the release of hostages by Hamas, but lowers expectations of an imminent agreement, adding complexity to the regional situation.
Beyond the uncertainty in Gaza, tensions in the Middle East persist following the U.S. commitment to protect its troops, especially after a lethal drone strike in Jordan. This incident intensifies regional instability, highlighting the complexity of geopolitical dynamics affecting the balance of power across the Middle East region.
In addition to the above, investors were watching the outlook following the Federal Reserve’s announcement on January 31, 2024, when it held interest rates at 5.50% and ruled out the possibility of a rate cut in the first quarter of the year. Despite this decision, the Fed left the door open to future adjustments, subject to the evolution of U.S. economic indicators.
Although this stance disappointed traders who were expecting a rate cut to boost economic activity in the world’s largest economy and leading energy consumer, Jerome Powell signaled that rates had peaked and would be reduced in the coming months if inflation continued to decline.
In terms of other macroeconomic indicators, on Thursday, February 1, 2024, New Claims for Unemployment Claims were released, coming in at 224k compared to a forecast of 213k. This data reveals continued easing in the labor market, beating expectations and suggesting the possibility of easing pressure on wage inflation.
Finally, the price of oil continues to be under pressure from the global economic outlook and conflicts in various regions, factors that have kept its price marked by instability and high volatility.