The liquidation continues in energy prices this morning as WTI sells off for a 6th straight day, and a major winter storm threatens to further sap demand for refined fuels in a year that’s already been quite soft in terms of consumption.
Oil futures were ticking higher overnight, up around 30 cents a barrel until a round of heavy selling came in around 6:30am central that knocked WTI down to fresh 3 month lows at $47.59. That selling has also pulled refined products into the red for a 5th consecutive day. Volatility in oil prices has been increasing as prices have been falling.
If WTI can settle below the $48 mark today, there’s a strong case to be made for a push towards $45 in the next week or so, which could take another dime out of refined product prices. All contracts are quickly moving into over-sold territory however, which could mean a sharp bounce whenever the waves of, what appear to be, forced selling subside.
Blizzard warnings and state of emergency notices cover much of the North Eastern US this morning as up to 2 feet of snow is expected in several areas. There was a notable tick up in gasoline demand ahead of the storm as consumers raced to fill up on staples, but now that many highways are closed, it appears that demand will fall to almost nothing for the next couple of days.
The Federal Reserve’s Open Market Committee (FOMC) begins a 2 day meeting today that is expected to end with an interest rate hike tomorrow afternoon. Fed fund futures now give a 90% likelihood of an increase tomorrow, down from 93% on Friday after the February jobs report. With this level of certainty, it’s likely that the increase has been “priced in” to both energy and equity markets, and we may not get a dramatic price swing tomorrow unless something unexpected happens. There has been a pattern over the past several years that equity markets tend to rally ahead of the FOMC meetings, but so far this morning, equities look like they want to sell off on the heels of oil prices.