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Oil falls 2 percent on Bernanke comments
Source: Agencies |
July 15, 2011, Friday
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OIL dropped more than 2 percent yesterday after Federal Reserve Chairman Ben Bernanke said the government would not immediately pump more cash into economic stimulus programs.
Bernanke told lawmakers on Wednesday that the Fed was looking at a variety of stimulus measures, including another round of bond buying, to lower long-term interest rates. Stimulus measures like that tend to weaken the dollar, and that drives investors to commodities like oil.
He dampened hopes that that would happen soon yesterday.
"We're not prepared at this point to take further action" to stimulate the economy," Bernanke said.
Oil tumbled shortly after Bernanke spoke.
Benchmark West Texas Intermediate crude for August delivery fell US$2.36 to settle at US$95.69 per barrel on the New York Mercantile Exchange.
In London, Brent crude gave up US$1.59 to settle at US$116.26 per barrel on the ICE Futures exchange.
Oil climbed nearly 20 percent late last year, ahead of the Fed's US$600 billion bond-buying program that began in November.
"They're not readying the stimulus package right now," and that's pushing some investors away, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
The dollar rose on Bernanke's comments. Oil tends to fall as the dollar rises, since oil is priced in dollars and becomes more expensive for investors with foreign currency as the dollar strengthens.
Meanwhile new economic reports on yesterday showed to only faint signs of a turnaround. The government said retail sales rose by 0.1 percent in June. They declined the previous month. And the Labor Department said the number of people who applied for unemployment benefits dropped last week by 22,000 to a seasonally adjusted 405,000. That's the lowest level in three months, but application levels above 400,000 still reflect a weak job market.
The Energy Information Administration also said that natural gas supplies rose more than expected last week. However, the 2.6 trillion cubic feet in storage last week is 2 percent below the five-year average.
In other Nymex trading for August contracts, heating oil fell 1.48 cents to settle at US$3.0849 per gallon and gasoline futures gave up 2.68 cents to settle at US$3.1248 per gallon. Natural gas lost 2.9 cents to settle at US$4.358 per 1,000 cubic feet.
Bernanke told lawmakers on Wednesday that the Fed was looking at a variety of stimulus measures, including another round of bond buying, to lower long-term interest rates. Stimulus measures like that tend to weaken the dollar, and that drives investors to commodities like oil.
He dampened hopes that that would happen soon yesterday.
"We're not prepared at this point to take further action" to stimulate the economy," Bernanke said.
Oil tumbled shortly after Bernanke spoke.
Benchmark West Texas Intermediate crude for August delivery fell US$2.36 to settle at US$95.69 per barrel on the New York Mercantile Exchange.
In London, Brent crude gave up US$1.59 to settle at US$116.26 per barrel on the ICE Futures exchange.
Oil climbed nearly 20 percent late last year, ahead of the Fed's US$600 billion bond-buying program that began in November.
"They're not readying the stimulus package right now," and that's pushing some investors away, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
The dollar rose on Bernanke's comments. Oil tends to fall as the dollar rises, since oil is priced in dollars and becomes more expensive for investors with foreign currency as the dollar strengthens.
Meanwhile new economic reports on yesterday showed to only faint signs of a turnaround. The government said retail sales rose by 0.1 percent in June. They declined the previous month. And the Labor Department said the number of people who applied for unemployment benefits dropped last week by 22,000 to a seasonally adjusted 405,000. That's the lowest level in three months, but application levels above 400,000 still reflect a weak job market.
The Energy Information Administration also said that natural gas supplies rose more than expected last week. However, the 2.6 trillion cubic feet in storage last week is 2 percent below the five-year average.
In other Nymex trading for August contracts, heating oil fell 1.48 cents to settle at US$3.0849 per gallon and gasoline futures gave up 2.68 cents to settle at US$3.1248 per gallon. Natural gas lost 2.9 cents to settle at US$4.358 per 1,000 cubic feet.
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