Oil extended its losses in Asian trade today on a stronger dollar after the US Federal Reserve hinted that it could ease its massive stimulus policy soon, analysts said.
New York’s main contract, West Texas Intermediate light sweet crude for delivery in July, dropped 58 cents to $93.70 a barrel in the morning trade and Brent North Sea crude for July delivery shed 47 cents to $102.13.
“Oil prices are being kept down after the US dollar strengthened,” Ric Spooner, chief market analyst at CMC Markets in Sydney, said.
A stronger greenback makes dollar-priced oil more expensive for buyers using weaker currencies. In turn, that tends to weigh on oil demand and prices.
Under questioning before the Joint Economic Committee in Congress on Wednesday, Federal Reserve Chairman Ben Bernanke acknowledged the Fed could decide to begin reducing its massive bond purchases in its next few meetings.
But he said any tapering off could only happen once it had confidence that economic gains could be sustained, warning that a “premature tightening of monetary policy” could derail the economic recovery.
The Fed, the US central bank, has been on a $85 billion a month bond-purchase programme, known as quantitative easing, as part of measures to boost the economy.
Crude stockpiles
Meanwhile, a lighter-than-expected drop in US crude stockpiles is also weighing on prices.
The US Government’s Department of Energy has announced that American crude stockpiles fell 300,000 barrels in the week ended May 17, less than the market expectations for a drop of 600,000 barrels.
The data indicated weaker demand ahead of the US summer driving season when Americans take to the roads for their holidays.
“The reality is that US crude inventory remains high, indicating weak demand as the driving season approaches,” said Spooner.