Fed decision hits oil prices

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IOL pic oct28 oil barrels . .

Tokyo - Oil prices were mixed in Asian trade on Thursday as global markets reeled from the Federal Reserve's decision to cut its massive stimulus package.

New York's main contract, West Texas Intermediate for March delivery, gained 17 cents to $97.52 in late morning trade while Brent North Sea crude for March was down four cents at $107.81.

The mixed performance of oil prices came as Asian stock markets slumped, extending a global rout on renewed fears about emerging economies after the Fed cut.

David Lennox, a resources analyst at Fat Prophets in Sydney, said, however, that the taper was a “reflection of the US economy which according to the Fed is growing at a better than expected rate at the moment”.

While the taper creates a downward pressure on prices in the short term, it bodes well in the long term for oil demand in the world's top crude-consuming nation, analysts have said.

The Fed, the US central bank, said on Wednesday said it would reduce its massive bond-buying programme by $10 billion a month to $65 billion, citing a pick-up in the US economy.

The move, which followed a similar announcement in December, stoked fears of huge capital flows from emerging markets that have benefited from the Fed's cheap money policies, as dealers look for safer investments back home.

Indications of weak demand from the United States and China are also weighing down on oil prices, analysts said.

China's manufacturing sector contracted for the first time in six months in January, British banking giant HSBC said Thursday, raising questions over growth prospects for the world's second-largest economy.

In the United States, the weekly Energy Information Administration report showed crude stockpiles rising by 6.4 million barrels in the week ending January 24, beating analysts' forecasts.

A rise in stockpiles indicates weak demand, putting downward pressure on prices. - AFP


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