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Oil drops below $87 as Fed optimism lifts dollar While Fed decision to end bond purchasing boosts demand outlook from U.S., dollar rises with expectations that Fed could soon lift interest rates
Brent crude oil fell below $87 a barrel on Thursday, pressured by a stronger dollar after the Federal Reserve painted a brighter outlook for the U.S. economy. The U.S. central bank on Wednesday ended its monthly bond purchase programme, showing confidence in the prospects for the U.S. economy. While that boosts the outlook for demand from the world's top oil user, the dollar is gaining as expectations rise that the Fed could lift interest rates soon. A stronger greenback makes dollar-priced commodities such as oil more expensive for buyers using other currencies. The dollar hit a 3-1/2-week high against a basket of currencies. "Anything priced in U.S. dollars is seeing a fall since (the Fed) released that statement and that goes right across the commodities complex," said analyst Ben Le Brun at OptionsXpress, referring to the statement released after a two-day Fed meeting. Brent crude for December was down 70 cents at $86.42 a barrel by 0830 GMT. U.S. crude fell 70 cents to $81.50. Both benchmarks climbed on Wednesday after data showed U.S. crude oil stockpiles rose less than expected last week, offering some relief for a market hit hard by a supply glut. Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt, said he was surprised oil prices had not fallen further on Thursday, given the strength of the dollar. "All commodities are under pressure," Fritsch said. "We should see a move back down towards the lows of the early part of the week." Brent touched a low of $84.55 on Monday. It dropped to $82.60 on Oct. 16, its lowest in almost four years, weighed down by brimming inventories worldwide. U.S. crude inventories rose 2.1 million barrels last week, less than the 3.4-million-barrel increase expected by analysts in a Reuters poll. A 25 percent slide in oil prices from June had raised suggestions that the Organization of the Petroleum Exporting Countries would curb output. But some OPEC members have not warmed to the idea of cutting production. OPEC Secretary-General Abdullah al-Badri said on Wednesday there was not likely to be a big change in OPEC's oil output next year. The better outlook for the U.S. economy, however, was helping to limit losses in oil prices on Thursday. Investors awaited U.S. gross domestic product data due later in the day, with growth seen coming in at 3 percent for the third quarter, according to a Reuters poll of economists. That would be down from 4.6 percent in the second quarter, the fastest growth since 2011. http://english.ahram.org.eg/News/114331.aspx
