Oil slumps in Asian trade

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Published Jan 28, 2015

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Tokyo - Oil prices fell in Asia on Wednesday as dealers await the outcome of a US Federal Reserve meeting and the release of a US supply report expected to show a surge in crude stockpiles, analysts said.

The US benchmark, West Texas Intermediate for March delivery, fell 75 cents to $45.48 while Brent for March eased 60 cents to $49.00 in mid-morning trade.

The Fed is expected to release a post-meeting statement later on Wednesday following the first gathering this year of its policy-making Federal Open Market Committee.

Singapore's United Overseas Bank (UOB) said the Fed statement will be pored over by investors for clues to the central bank's thinking on the timing for an expected interest rate hike later this year, the first since 2006.

“We continue to expect the Fed rate normalisation to take place in 2Q-2015,” UOB said in a commentary.

“We do see the possibility that the Fed (could be) increasingly torn between strong jobs data with a potentially steep decline in headline inflation on the back of a plunge in oil prices,” the Singapore lender said.

The Fed has kept its key federal funds rate pegged between zero and 0.25 percent since late 2008 to support the US economy's recovery from the deep 2008-2009 recession.

In October, the Fed ended its massive asset-purchase programme, or quantitative easing, and has signalled that a rate hike would be coming this year. Most analysts expect the increase will arrive by June.

Interest rate adjustments are closely watched by crude investors as an increase usually leads to a pick-up in the dollar.

A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies, denting demand.

Analysts said oil prices were also pressured after industry group the American Petroleum Institute said US crude reserves likely surged by 12.7 million barrels in the week to January 23.

The US Energy Department will release the official stockpiles report later on Wednesday.

AFP

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