WTI crude traded close to its lowest level in a month, as market participants continue to speculate that the Federal Reserve (Fed) will begin to scale-back its monthly bond purchases this year, after signs of improvement in the world largest economy.
Futures were flat after yesterday’s 3% drop, the biggest fall since Nov, 2012. Investors are focused on how quick the Federal Reserve would begin to scale-back on its bond purchases after a string of data released yesterday revealed the US jobless claims declined, while the manufacturing climbed. According to analysts, US crude stockpiles dropped for the fourth time in a row in five weeks.
“It’s a reaction by the market to the surge in the U.S. dollar due to the tapering expectation that really caused WTI to plunge” yesterday, said Victor Shum, IHS Energy Insight’s Vice President.“Weaker currencies for consuming countries make oil look expensive, that’s why there is an inverse relationship between the move in the U.S. dollar and moves in oil futures,” he added.
West Texas Intermediate for February delivery came in at $95.31 per barrel on the New York Mercantile Exchange at the time of writing. It declined $2.98 to 95.44% a barrel yesterday, the lowest since December 2.
While the European benchmark Brent crude climbed by 0.1% to $107.93 a barrel on the ICE Futures Europe exchange, the crude was at a premium of $12.62 to WTI.
WTI Crude – US Economy
The Labour Department posted the US jobless claims which showed a drop by 2,000 to 339,000 last week. The US Manufacturing expanded in December; the Institute for Supply Management’s factory index came in at 57.
The Federal Reserve’s Chairman Ben S. Bernanke confirmed the Fed would begin to scale-back its bond purchases this year because of the progress and improved outlook in the job market. The Fed will reduce its monthly bond purchases from $85 billion to $75 billion, starting this month.
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