Oil prices have dropped towards an 11-year low due to supply glut and strong dollar following an increase in interest rates by the US Federal Reserve.

Brent crude for February delivery edged down 20 cents to $37.19 a barrel, while the West Texas Intermediate for January delivery declined 5 cents at $35.47 a barrel, Reuters reported.

In a meeting held yesterday, the Federal Reserve increased interest rates, hinting that the US economy had largely overcome the financial crisis during 2007 and 2009.

Due to hike in rates, the dollar received support, making it expensive for other currency holders to buy oil.

Data released by the government highlighted a rise in US crude stocks on Wednesday, adding to over supply worldwide.

This is believed to have contributed to a near 17% fall in December alone.

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The US central bank’s policy-setting committee increased the interest rate by a quarter of a percentage point to between 0.25% and 0.50%.

Policy statement released by the Federal Reserve noted considerable improvement in the country’s labour market where the unemployment rate fell to 5%.