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Crude slips below $83; investors watch Fed, Europe
Source: Agencies |
April 28, 2010, Wednesday
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OIL prices dropped for a second straight day yesterday as traders waited to see whether the Federal Reserve will keep interest rates at record lows that have helped support crude prices.
Oil also followed the stock market lower amid concerns that the European government debt crisis, centered on Greece, is spreading after Standard & Poor's downgraded the debt of Greece and Portugal. The worry is that the problems can damage the economic recovery and hurt oil demand.
Benchmark crude for May delivery fell US$1.76 to settle at US$82.44 a barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average was down about 140 points in afternoon trading.
When the Fed wraps up its two-day meeting Wednesday, it is all but certain to leave the key bank lending rate between zero and 0.25 percent, where it's been since December 2008.
The question is whether the Fed will talk about taking steps to reduce the unprecedented amount of money it pumped out to fight the Great Recession. The economy is getting better, but unemployment remains near double digits and is expected to stay high all this year.
Tougher talk from the Fed could mean higher interest rates eventually, which could slow economic growth, and crimp demand for oil with supplies already high, PFGBest analyst Phil Flynn said.
"The price of oil has been driven by Fed policy," he said. "When you remove the policy it should put downward pressure on the price."
Any Fed move also could drive the dollar higher and that too can affect oil prices. A stronger dollar makes crude more expensive for investors holding other currencies.
Traders also will be watching first-quarter earnings reports from the biggest oil companies and refiners for more clues about energy demand. ExxonMobil, ConocoPhillips and Chevron release earnings later this week.
America's top refiner, Valero, on yesterday said it lost money for the fourth straight quarter as the country burned less fuel.
In other Nymex trading in May contracts, heating oil fell 0.68 cent to settle at US$2.2303 a gallon, and gasoline dropped 1.41 cents to settle at US$2.3268 a gallon. Natural gas slipped 4.6 cents to settle at US$4.216 per 1,000 cubic feet.
In London, Brent crude lost US$1.05 to settle at US$85.78 on the ICE futures exchange.
Oil also followed the stock market lower amid concerns that the European government debt crisis, centered on Greece, is spreading after Standard & Poor's downgraded the debt of Greece and Portugal. The worry is that the problems can damage the economic recovery and hurt oil demand.
Benchmark crude for May delivery fell US$1.76 to settle at US$82.44 a barrel on the New York Mercantile Exchange.
The Dow Jones Industrial Average was down about 140 points in afternoon trading.
When the Fed wraps up its two-day meeting Wednesday, it is all but certain to leave the key bank lending rate between zero and 0.25 percent, where it's been since December 2008.
The question is whether the Fed will talk about taking steps to reduce the unprecedented amount of money it pumped out to fight the Great Recession. The economy is getting better, but unemployment remains near double digits and is expected to stay high all this year.
Tougher talk from the Fed could mean higher interest rates eventually, which could slow economic growth, and crimp demand for oil with supplies already high, PFGBest analyst Phil Flynn said.
"The price of oil has been driven by Fed policy," he said. "When you remove the policy it should put downward pressure on the price."
Any Fed move also could drive the dollar higher and that too can affect oil prices. A stronger dollar makes crude more expensive for investors holding other currencies.
Traders also will be watching first-quarter earnings reports from the biggest oil companies and refiners for more clues about energy demand. ExxonMobil, ConocoPhillips and Chevron release earnings later this week.
America's top refiner, Valero, on yesterday said it lost money for the fourth straight quarter as the country burned less fuel.
In other Nymex trading in May contracts, heating oil fell 0.68 cent to settle at US$2.2303 a gallon, and gasoline dropped 1.41 cents to settle at US$2.3268 a gallon. Natural gas slipped 4.6 cents to settle at US$4.216 per 1,000 cubic feet.
In London, Brent crude lost US$1.05 to settle at US$85.78 on the ICE futures exchange.
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