Oil prices tumble on Fed stimulus signal

Published: Updated:
Read Mode
100% Font Size
2 min read

Oil prices slumped on Thursday, mirroring the direction of stock markets and gold prices, a day after Federal Reserve Chairman Ben Bernanke signaled that US central bank would wind down its stimulus program this year.

Brent North Sea crude for August slid $1.90 to stand at $104.22 a barrel in London midday deals.

New York’s main contract, light sweet crude for delivery in July, shed $1.85 to $96.39 a barrel.

“Oil prices have inevitably failed to escape the present climate and have come under strong pressure following the statements made by Fed chairman (Ben) Bernanke,” said Commerzbank analyst Carsten Fritsch.

“Poor economic data from China are also playing their part,” he added.

Ahead of Wednesday’s meeting of the Fed’s policy committee, markets had been rife with speculation on when it would begin reeling in its $85 billion-a-month bond-purchase program.

While the Fed decided to maintain the program for now, Bernanke said it would be “appropriate to moderate the monthly pace of purchases later this year” if economic data comes in as forecast.

He also said the program could be ended completely in mid-2014.

“Bernanke’s comments have caused everything from equities to commodities to pull back,” Kelly Teoh, market strategist at IG Markets in Singapore, told AFP.

“There is also a general consensus that global growth is slowing down, and that is also weighing on prices.”

Elsewhere, preliminary data on Chinese manufacturing from HSBC bank Thursday showed activity contracted again in June and was at a nine-month low point.

And on Wednesday official data revealed an unexpected build in US crude oil inventories, confirmed weak demand.

The drop in oil prices has erased last week’s gains, which were fuelled by fears the civil war in Syria could escalate and push the crude-rich Middle East into a wider conflict.

“The concerns about Syria are still there, but at the moment people are selling and preferring to hold on to their cash,” Teoh said.

Top Content Trending