Oil Drops After FOMC and Strong Inventories

West Texas Intermediate retreated from a one-week high after the Federal Reserve ended its asset-purchase program and production rose to the highest in more than three decades. Brent slid in London.

Futures fell as much as 1.2 percent in New York. The dollar strengthened a second day against the euro after the Fed’s announcement, undermining the appeal of commodities priced in the U.S. currency for protecting against inflation. U.S. crude stockpiles gained for a fourth week as production increased to 8.97 million barrels a day, the most since January 1983, according to the Energy Information Administration.

“It’s another negative factor for the oil market and for commodities in general, coming on top of an already oversupplied oil market,” Hans van Cleef, energy economist at ABN Amro Bank NV in Amsterdam, said by phone of the Fed’s move. “When you pull money out of the market, normally the first thing you’d sell is riskier assets.”

WTI for December delivery dropped as much as 99 cents to $81.21 a barrel in electronic trading on the New York Mercantile Exchange, and was at $81.45 at 11:46 a.m. London time. The contract climbed 78 cents to $82.20 yesterday, the highest close since Oct. 21. The volume of all futures traded was about 7 percent below the 100-day average for the time of day. Prices have decreased 17 percent this year.

Brent for December settlement declined as much as 87 cents, or 1 percent, to $86.25 a barrel on the London-based ICE Futures Europe exchange. The contract rose 1.3 percent yesterday. The European benchmark crude traded at a premium of $4.96 to WTI on ICE, compared with $4.92 yesterday.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza