Oil drops on Bernanke comments

22nd May 2013, Comments 0 comments

Global oil prices fell on Wednesday after Federal Reserve chairman Ben Bernanke Chairman indicated that the US central bank was in no hurry to end its loose monetary policy stance.

Traders meanwhile shrugged off news that US crude inventories dipped slightly last week.

Brent North Sea crude for delivery in July dropped 74 cents to $103.17 a barrel in late afternoon trade in London.

New York's main contract, light sweet crude for July, slipped $1.11 to $95.07 per barrel.

"Bernanke, somewhat unsurprisingly, reiterated that it is too soon for the Fed to withdraw its lifeline, arguing that the jobs market remains weak," said GFT Markets analyst Fawad Razaqzada.

"The dollar initially fell but then rallied, causing oil prices to fall.

The stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies. In turn, that tends to weigh on oil demand and prices.

In a statement to Congress, Bernanke acknowledged the risks of the Federal Reserve's low interest-rate policy, but warned that tightening policy now could stall the US economy's recovery.

"A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," Bernanke said.

Markets paid close attention to Bernanke's comments for an indication on when the Fed would start winding down its massive bond-buying programme that is aimed at boosting the economy.

"Fed Chairman Ben Bernanke's prepared testimony ... today suggests that he is in no hurry to curb the Fed's open-ended purchases of $85-billion in assets per month," said Paul Ashworth, chief US economist at research house Capital Economics.

Separately, the US government's Department of Energy announced that American crude stockpiles fell by 300,000 barrels in the week ended May 17.

That was lighter than market expectations for a drop of 600,000 barrels.

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© 2013 AFP

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