WTI plunges on recession fears

• West Texas Intermediate crude plunges on Thursday.
• Investors fear a recession after the Fed.

West Texas Intermediate Crude Oil plunged on Thursday despite risk appetite and as markets continued to digest the more dovish guidance from the Federal Open Market Committee. However, the central bank’s forecast of further recession has renewed concerns and has weighed on oil prices. West Texas Intermediate is down around 1% after falling from a high of $71.63 and hitting a low of $69.24 so far.

The drop came after the Federal Reserve raised interest rates by 25 basis points on Wednesday, as expected, and said more hikes are likely. However, bleak prospects due to risks associated with the problems in the banking sector are also weighing on the price of oil. In addition, US Treasury Secretary Janet Yellin warned that the US government will not automatically insure all deposits in future bank bailouts.

Meanwhile, rising US oil inventories were seen in the Energy Information Administration report. The previous week saw an increase of 1.1 million barrels in inventories, compared to the estimate of a fall of 1.8 million barrels.

Analysts at TD Securities say energy markets are seething: “While shorting CTA contributed to the decline before a technical breakout catalyzed a full-scale stop-out, buying activity is unlikely to pick up strength until WTI crude prices break above the 78.50/bbl range.”