Oil futures are pricing in the 75 basis-point hike by the FED, oil down below its $95 support. WTI Cushing price has diverged holding above $100, as oil stockpiles are down on a four year low.

Chart 1

Chart 2

Chart 3

The oil price is showing further signs of volatility, with China demand decreasing from its COVID lockdown of March, April and May 2022, the oil price remained bid trading above its $95 and $100 price supports.   The war in Ukraine and the Russian oil bans have further kept the oil price and five years highs.   With markets trying to gauge a recession or economic stagflation, at this point inflation is undoubtedly, more so energy inflation is the main concern, which is spilling over into everything, mixed with on going supply chain issues.   Oil may not collapse into any form of demand destruction, unless globally we enter into a extreme depression or another pandemic (or a mutated COVID wave?).     At this point stagflation has arrived rather than a recession, with the Federal Reserve and other Central Banks beginning their interest  rate cycle.

Chart 1 shows the Crude Oil futures which are now trading below the $95 price support on the back of traders pricing in a 0.75% rate hike by the Fed (July 27th), yet it is the West Texas Immediate Cushing price, which are sitting above $100 at $104, which indicates that supply is still very tight.  Please refer to Chart 2,  that shows the  Stockpiles at Cushing, Oklahoma, to which the WTI is priced from, at 22,789 barrels, a four year low (2018).   Chart 3, better describes the importance of the West Texas Immediate Cushing price and its correlation with crude oil futures, as noted with Chart 2 at the low stockpiles of oil, crude and the WTI Cushing price correlated and were both trading above $72 a barrel in July 2018.