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December 18, 2013

Oil prices drop as dollar weighs on Fed stimulus tapering

Oil prices decreased today after the dollar value surged upwards following the US Federal Reserve’s decision to taper its monetary stimulus.

By admin-demo

offshore

Oil prices decreased today after the dollar value surged upwards following the US Federal Reserve’s decision to taper its monetary stimulus.

According to Reuters, Brent crude dropped by $0.23 to $109.40 a barrel, while US crude was down by $0.11 to $97.69 a barrel.

The Fed’s decision has left Wall Street at record highs and the dollar above JPY104 for the first time since 2008. However, it has impacted negatively on oil, making it expensive for holders of other currencies to buy.

The central bank said that it would reduce its monthly asset purchases by $10bn ($11.3bn) to a total of $75bn. It has trimmed equally from mortgage and Treasury bonds.

The move, which could come as a surprise to many investors, was felt to be leading to better prospects for the economy and labour market, and marks a historic turning point for the largest monetary policy experiment ever.

Prices got some support from supply concerns due to the unfolding crisis in South Sudan, however.

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The army of South Sudan declared that it has lost control of the flashpoint town of Bor, its first acknowledged reversal in three days of clashes between rival groups of soldiers that have triggered warnings of a slide into civil war.

Oil prices got more support after US Energy Information Administration data revealed that inventories of crude across the country fell by 2.94 million barrels.


Image: Oil prices drop as Fed draws taper’s sting. Photo: courtesy of freedigitalphotos.net/Victor Habbick.

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