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Market Update

Powell’s hawkish turn; decline in petroleum demand brings prices down from summer highs

November 13, 2023
  • amol dhargalkar headshot


    Amol Dhargalkar

    Managing Partner, Chairman
    Global Head of Corporates

    Kennett Square, PA


During a light week for economic releases, commentary from Federal Reserve leaders provided color on the path forward for interest rates. Petroleum product prices dropped to recent lows amid reduced demand and growing interest in Venezuelan oil.

Busy week for “Fed speak”

After dovish sentiments dominated headlines immediately following the FOMC’s November meeting, language used by Federal Reserve officials this week (including FOMC Chair Jerome Powell) seemed to indicate a more hawkish view on the work ahead for the Fed. In remarks at a panel discussion for an International Monetary Fund conference on Thursday, Chair Powell clarified that the Fed “will not hesitate” to tighten policy further if it “becomes appropriate,” emphasizing that “a few good months of data” are not enough to make the Fed confident their work is done in the fight against inflation. Treasury yields ticked up Thursday afternoon in response to the remarks, a reverse from their downward slide in recent weeks.

Federal Reserve Governor Michelle Bowman was the most hawkish in her comments at the New York Bankers Association’s Financial Services Forum, stating that she expects that the FOMC “will need to increase the federal funds rate further to bring inflation down to our two percent target in a timely way.” While she acknowledged she supported the decision to hold the target rate steady at the November 1 meeting, few other officials have been so direct recently in stating they see more rate hikes being necessary.

Other Fed officials stuck more to the often-used talk tracks of relying on data and keeping options open as the Committee monitors inflation. Chicago Federal Reserve President Goolsbee kept the focus on inflation, highlighting progress made but noting that the work is not yet done. Minneapolis Federal Reserve President Kashkari did not count out another rate hike if inflation “tick[s] back up,” but made explicitly clear that there has been “no discussion” of rate cuts among FOMC officials.

Despite reiteration from FOMC officials that rate cuts are not yet a part of the conversation, as of Friday morning, CME futures data was still pricing in a first cut at the Fed’s June 2024 meeting. With this disconnect between more optimistic market expectations and more hawkish Fed language, some companies have been taking advantage of the opportunity to hedge their floating rate debt and lock in swap rates before a potential market readjustment. Pre-issuance hedging remains another option for reducing longer-term risk.

Crude, gasoline slip to recent lows

WTI crude oil reached its lowest price per barrel since July last week, dropping to lows of just above $75 per barrel on Thursday. Brent crude prices similarly slipped to less than $80 per barrel mid-week, with both contracts falling around 5% just over the course of last week. Gasoline prices also touched lows of around $2.13 per gallon mid-week last week, the lowest levels seen since almost a year ago in December 2022.

These price drops were influenced by seasonal declines in demand, as well as weaker economic data out of China, but another factor in play was increasing interest in Venezuelan petroleum products. Last month, President Biden reversed sanctions placed on Venezuela during the Trump administration, and Venezuela is now ramping up its crude oil production and bring back domestic and international customers. Egyptian, French, Indian, and Chinese companies and officials made their interests in Venezuelan oil known in recent weeks, and this shift in demand has helped drive down prices across petroleum and oil products.

Looking forward

Next week, inflation and producer price index data from October should provide a fresh indication of whether the FOMC’s actions are achieving their intended results. October retail sales figures and additional commentary from Federal Reserve leaders round out the week.

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About the author

  • Amol Dhargalkar

    Managing Partner, Chairman
    Global Head of Corporates

    Kennett Square, PA

    Amol Dhargalkar is a Managing Partner and Chairman for Chatham’s Board of Directors. He is the Global Head of the Corporates sector and brings over 20 years of experience in derivatives capital markets expertise.


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit