Why higher central bank rates are bullish oil

This snippet is via ANZ commodity analysts after Federal Reserve Chair Powell warned of higher rates still to come and the Bank of England ratcheted its rate 50bp higher.

  • Tighter monetary policy has been a headwind for commodity markets. However, the market is misreading its impact.
  • Higher interest rates have increased the cost of holding stock, causing producers to let stocks run down. And higher rates are weighing on the futures curve, as it makes it more expensive to hold a barrel of oil today. The resultant flattening of the futures curve is less to do with weaker demand.
  • Added to this is the fact that easing inflation has reduced investor appetite.

This article was written by Eamonn Sheridan at www.forexlive.com. Source