Shortly after oil prices skyrocketed due to the destruction of Saudi Aramco's Abqaiq plant, one of the globe's largest oil facilities, the commodity plummeted as Saudi Arabia began to fix up the plan and resume normal oil supply.
Oil, which surged 15% on Monday, fell upon the market getting wind of the fact that Saudi officials said they had already restored about half of the output that was lost at the plant. U.S. oil futures settled at a low of 5.7% at $59.24 a barrel. This was the worst one-day drop for U.S. oil since August 1, according to Refinitiv.
Crude gave back some of Monday's 15% surge as Saudi officials said they had restored just under half the output lost at the Abqaiq plant, one of the world's biggest oil facilities.
The ten year note took a tumble on yields as the Fed carried out its first overnight repo auction in a decade to bring the benchmark federal-funds rate down to the 2 to 2.25% range, as it shot up to a high of 9%. The reason the benchmark spiked is because corporate tax payments were due on Monday, expected to pull a maximum of $100 billion out of the markets, with the low demand causing higher rates.
"Sustained federal funds rate pressure will likely raise questions about the Fed's ability to control money markets, especially as the federal funds rate approaches the upper end of the Fed's target range," Cubana wrote in a report.
Given the volatile fluctuations in oil prices, new sanctions on Iran, an unstable global political scene including Brexit and U.S.-China trade tensions, it really seems as though the Federal Reserve is set to cut interest rates Wednesday, in response to a slowing global economy and impending recession.
In fact, given how much flack the Fed is facing for acting slowly in response to the rise in repo rate, it may have to take more deliberate and further action tomorrow to solidify its credibility: "The Fed knew we could have a rate blow up," said Scott Skyrm, a repo trader at Curvature Securities. "The last year-end should've been a big eye-opener but they haven't done anything since."