Crude prices crash on fears of Fed rate hike

After remaining relatively stable in the $50-$55 range for the last 3 months, international crude oil prices have started crashing. WTI variety of crude oil has fallen by more than 7% in the last 2 days and with this, its price has gone below the psychological support level of $50 per barrel.



Several factors are responsible for this. Supply side dynamics like high oil inventories in the US (around 528 million barrels), increasing rig counts in the US, etc. are the medium-term negative factors. Increasing strength in dollar, triggered by fears of rate hike by the Federal Reserve, is the short-term negative factor. Commodity traders and fund managers changing their view and reducing speculative position is the immediate trigger.

Liquidation of speculative position is a sign of further bearishness in the oil counter in the short-term. “We expect this fall to continue towards the $46 mark in the coming trading sessions,” says Prathamesh Mallya, Chief Analyst, Non-Agri Commodities, Angel Broking.