The weakening of the U.S. dollar helped oil prices this week, keeping WTI front-month prices at $86 per barrel despite the avalanche of bad macroeconomic news.
With business activity contracting in the U.S., the UK and the euro zone (in the latter it was the worst industrial performance report in the entire post-pandemic period), the oil market bulls are still facing an uphill battle, indicating that the lack of supply in the short term will gain the upper hand over demand concerns in the longer term. So far it has been a draw, OilPrice said.
White House won’t appeal oil spill tax decision. After a Texas District Court found that the recently Senate-enacted federal 9¢/barrel oil spill cleanup tax ran afoul of the export clause in the US Constitution, the Biden administration announced it would not appeal the ruling despite its objections.
European inflation hits double digits. Whilst the commodity markets have been buzzing about upcoming Federal Reserve rate hikes, the European Central Bank is widely expected to follow down the same route and bring the deposit rate to 1.5% this week. This would mark the second straight 75 basis points increase, with hikes of at least 100 basis points expected until the deposit rate reaches an assumed peak of 2.5% in March 2023.
The ECB still expects Eurozone GDP growth to reach 3.1% this year, having raised its outlook from June 2022 by 0.3% despite inflation hitting 10% in September, meaning that layers of European bureaucracy still fail to grasp the severity of the crisis. Starting interest rate hikes much later than the Fed, the ECB is still undecided on quantitative tightening – offloading the $5 trillion bonds that it has accumulated over the post-pandemic period – meaning EU growth rates might be in slower growth in the long run.