30 October 2014, News Wires – Brent oil futures fell below $87 a barrel on Thursday, pressured by a stronger US dollar after the Federal Reserve painted a brighter outlook for the US economy.
The US central bank on Wednesday ended its monthly bond purchase programme and showed confidence in the prospects for the US economy. While that boosts the outlook for demand from the world’s top oil user, the dollar is gaining as expectations rise that the Fed could lift interest rates soon.
A stronger greenback makes dollar-priced commodities such as oil more expensive for buyers using other currencies. The dollar hit three-week highs against a basket of currencies.
“Anything priced in US dollars is seeing a fall since FOMC released that statement and that goes right across the commodities complex,” said Ben Le Brun, market analyst at OptionsXpress in Sydney, referring to the statement released after a two-day Fed meeting.
Brent crude for December delivery was off 15 cents at $86.97 a barrel early on Thursday, off an early low of $86.80. December US crude fell 24 cents to $81.96 per barrel.
Both Brent and West Texas Intermediate climbed on Wednesday after data showed US crude stockpiles rose less than expected last week, offering some relief for a market that had been hit hard this year by a supply glut.
US crude inventories rose 2.1 million barrels last week, less than the 3.4-million-barrel increase expected by analysts in a Reuters poll.
“Although US crude inventories increased lower than expected, this still does not alleviate the oversupply situation in the US,” Phillip Futures said in a research note.
“US crude inventories are still higher than past years and it is only a matter of time before we see inventories start to increase again, causing prices to drop again.”
The better outlook for the US. economy is helping limit losses in oil prices on Thursday.
“If we see continued gains in the U.S. employment market that should just improve the overall picture in terms of demand and obviously that will be good for oil prices,” said Le Brun, who sees support for Brent at $85 and for WTI at $80.
Investor focus will turn to US gross domestic product data due later in the day, with growth seen coming in at 3% for the third quarter, according to a Reuters poll of economists. That would be down from a 4.6% pace in the second quarter, the fastest growth since 2011.