Crude Prices Calm at $52, Investors Await Fed MinutesCrude oil prices are slightly lower in Tuesday trade, as crude trades just above the $52 level. We could see stronger movement on Wednesday, with the release of the Fed minutes. The unrest in Iraq and the threat of a Turkish attack on Kurdish positions in Syria is causing nervousness in the markets and could trigger higher oil prices.
Crude has started the week quietly, but the lack of movement could change on Wednesday, as the Federal Reserve releases the minutes of the September meeting. At that meeting, policymakers trimmed rates by 25 basis points, the second cut in as many policy meetings. Fed Chair Powell sought to reassure the markets that the move did not signal an imminent slowdown in the U. S. economy, saying that the cut was an “insurance policy” in case economic activity slowed. The minutes will provide further insight into the Federal Reserve’s view of the U.S. economy, and a positive assessment could put some upward pressure on oil prices.
On Thursday, the U.S. releases CPI, the primary gauge of consumer spending. Inflation has been subdued, with three gains of 0.1% in the past four months. Another gain of 0.1% is expected in the upcoming release. With inflation levels well below the Federal Reserve target of 2.0%, there is no pressure on rate-setters to raise rates, and the Fed could lower rates again before the end of the year if a cut is warranted by economic conditions.
Middle East Troubles Could Boost Crude
There are two geopolitical hot spots in the Middle East that could spiral out of control and send oil prices sharply higher. In Iraq, dozens of civilians have been killed in violent demonstrations against the government. The violence has reached the port city of Basra, which is a key shipping terminal for most of Iraq’s oil exports. A further escalation in violence could threaten Iraqi oil supplies and boost crude prices. A second trouble spot is in eastern Syria. President Trump has started a pullout of U.S. forces, and Turkey has vowed to start a military campaign against Kurdish forces in the region as soon as the U.S. withdrawal is complete. The U.S. has warned Turkey not to take any military action, but the volatile situation could weigh on the financial markets and trigger higher oil prices if investors react negatively.