US Fed decision probably having negative effect for Crude oil prices

Fears of a slump in Chinese demand led to sharp swings in crude oil prices last month. Brent and WTI fell to fresh year-to-date lows of $42.23/bbl and $37.75/bbl, respectively, before recovering by c. 30% to stabilising at higher levels. Signs that Chinese equities and the CNY exchange rate have stabilised has recently lent support to crude oil prices. 

Such calm, however, could prove temporary as the outlook for China's economy highly uncertain and volatility in crude oil futures markets remains high. Market sentiment, although not as downbeat as August, is still negative due to clear evidence of market oversupply. 

The supply of crude oil is estimated to have exceeded demand by a staggering 2 mb/d in Q3. The decision by the US Fed not to raise interest rates was on balance probably more negative than positive for crude oil prices. The Fed's concerns around global growth if prove founded do not bode well for global crude oil demand. 

"In addition, depending on how long the Fed delays, it also could lead to a deferral in the burgeoning supply-side response as firms are able to continue to access cheap sources of debt financing. These factors should outweigh any positive impacts of a weaker US dollar", says Lloyds Bank.