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Oil prices settle lower after Fed statement
Source: Agencies |
August 11, 2010, Wednesday
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OIL prices regained some ground but settled lower yesterday after the Federal Reserve announced a small move to boost the U.S. economic recovery.
Benchmark crude lost US$1.23 to settle at US$80.25 a barrel on the New York Mercantile Exchange after falling as low as US$79.20 a barrel earlier in the day.
The Federal Reserve said it will use money from its investments in mortgage securities to buy government debt on a small scale. That could help send long-term rates on mortgages and corporate debt slightly lower.
The Fed also said the pace of economic recovery is "likely to be more modest in the near term than had been anticipated," and that it would take more aggressive action to keep the recovery on track if needed.
The stock market got a boost from the news. The Dow Jones Industrial Average, down about 100 points before the Fed announced its plans, was off about 30 points shortly before the close. The other major market indexes also bounced back from their lows.
Oil prices have mirrored patterns in the stock market in recent weeks, as traders try to gauge consumer sentiment.
Tradition Energy analyst Chris Dillman said oil prices may lose more ground Wednesday if a government report shows a surprise build in U.S. crude inventories.
Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expect the Energy Department to report a drop of 2.4 million barrels in U.S. oil reserves for the week that ended Aug. 6.
Meanwhile, the National Hurricane Center is monitoring thunderstorms in the eastern Gulf of Mexico that could develop into a tropical storm. Another area of disturbed weather lurks out in the Atlantic. Big storms can boost the price of oil and gas on concerns about production and supplies.
The threat of tropical storms is not affecting current oil prices because a premium for the effect of hurricanes is built into the price, PFGBest analyst Phil Flynn said.
"The market has been less concerned because here we are already at Aug. 10 and we really haven't had a storm that's done any major damage down in the gulf," he said. "I know it only takes one and we realize that but really I think the market was pricing in such a monster season that it thinks it can avoid this one storm."
In other Nymex trading in September contracts, heating oil gave up 2.84 cents to settle at US$2.1254 a gallon, gasoline dropped 3.34 cents to settle at US$2.0853 a gallon and natural gas fell 1.2 cents to settle at US$4.297 per 1,000 cubic feet.
In London, Brent crude fell US$1.39 to settle at US$79.60 a barrel on the ICE Futures exchange.
Benchmark crude lost US$1.23 to settle at US$80.25 a barrel on the New York Mercantile Exchange after falling as low as US$79.20 a barrel earlier in the day.
The Federal Reserve said it will use money from its investments in mortgage securities to buy government debt on a small scale. That could help send long-term rates on mortgages and corporate debt slightly lower.
The Fed also said the pace of economic recovery is "likely to be more modest in the near term than had been anticipated," and that it would take more aggressive action to keep the recovery on track if needed.
The stock market got a boost from the news. The Dow Jones Industrial Average, down about 100 points before the Fed announced its plans, was off about 30 points shortly before the close. The other major market indexes also bounced back from their lows.
Oil prices have mirrored patterns in the stock market in recent weeks, as traders try to gauge consumer sentiment.
Tradition Energy analyst Chris Dillman said oil prices may lose more ground Wednesday if a government report shows a surprise build in U.S. crude inventories.
Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expect the Energy Department to report a drop of 2.4 million barrels in U.S. oil reserves for the week that ended Aug. 6.
Meanwhile, the National Hurricane Center is monitoring thunderstorms in the eastern Gulf of Mexico that could develop into a tropical storm. Another area of disturbed weather lurks out in the Atlantic. Big storms can boost the price of oil and gas on concerns about production and supplies.
The threat of tropical storms is not affecting current oil prices because a premium for the effect of hurricanes is built into the price, PFGBest analyst Phil Flynn said.
"The market has been less concerned because here we are already at Aug. 10 and we really haven't had a storm that's done any major damage down in the gulf," he said. "I know it only takes one and we realize that but really I think the market was pricing in such a monster season that it thinks it can avoid this one storm."
In other Nymex trading in September contracts, heating oil gave up 2.84 cents to settle at US$2.1254 a gallon, gasoline dropped 3.34 cents to settle at US$2.0853 a gallon and natural gas fell 1.2 cents to settle at US$4.297 per 1,000 cubic feet.
In London, Brent crude fell US$1.39 to settle at US$79.60 a barrel on the ICE Futures exchange.
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