Oil Falls On Speculation Fed To Forgo Stimulus.... ha ha ho ho discombobulato
Oil Falls On Speculation Fed To Forgo Stimulus
By Moming Zhou - Jul 31, 2012 9:18 AM PT
Oil fell for a second day as speculation that the Federal Reserve will announce additional measures to stimulate the economy declined after U.S. consumer confidence and business activity unexpectedly grew.
Prices dropped as much as 2 percent as a Bloomberg survey of economists showed the Fed will probably forgo a third round of large-scale asset purchases at a two-day meeting beginning today. Consumer confidence rose for the first time in five months in July and a barometer of business activity gained.
“Some of the hopes for Fed easing have gone out of the market and that’s why you are seeing the selloff,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “A lot of the recent rally was solely built upon monetary easing. With the slightly improved economic data, the Fed might not see the urgency that it did.”
Oil for September delivery fell $1.61, or 1.8 percent, to $88.17 a barrel at 12:17 p.m. on the New York Mercantile Exchange. Prices have climbed 3.8 percent this month and declined 11 percent this year. Earlier, futures touched $88.01.
Brent crude for September settlement decreased $1.15, or 1.1 percent, to $105.05 a barrel on the London-based ICE Futures Europe exchange.
The Confidence Board’s confidence index increased to 65.9 this month from 62.7 in June, figures from the New York-based private research group showed today. Economists projected a reading of 61.5, according to the median estimate in a Bloomberg survey.
Business activity in the U.S. unexpectedly grew at a faster pace in July as the economy weathered a slowdown in hiring and household spending. A barometer from the Institute for Supply Management-Chicago Inc. increased to 53.7 from 52.9 in June. Readings greater than 50 signal growth. A Bloomberg survey projected the purchasing managers’ gauge would decline to 52.5.
Fed Chairman Ben S. Bernanke said July 17 that the central bank was studying options for further easing of monetary policy.
“If we don’t get anything from the Fed, we’ll be under pressure,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Oil continues to consolidate around $90, and it’s going to need some fairly significant stimulus measures to trigger another rally.”
Eighty-eight percent of economists in the Bloomberg survey said the Federal Open Market Committee will refrain from starting new purchases. Forty-eight percent say the Fed’s policy-making committee will announce plans to buy $600 billion in housing and government debt at its Sept. 12-13 meeting, according to the July 25-27 survey of 58 economists.
Bernanke said during testimony to the Senate Banking Committee July 17 that easing tools include further purchases of assets, such as mortgage-backed securities, reducing the interest rate that the Fed pays on reserves banks keep with the Fed, and altering its communications on the outlook for interest rates.
Oil also declined as German Chancellor Angela Merkel’s coalition rejected granting the permanent euro rescue fund access to European Central Bank liquidity via a banking license. France and Italy are building support for such a plan as part of efforts to stem Europe’s debt crisis.
The German Finance Ministry in Berlin said it saw no need for any such move in an e-mailed response to questions.
“We’re down on concerns about Europe,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Prices were elevated on optimism that additional stimulus was on the way. The Germans have thrown a wet blanket on those hopes.”
U.S. oil supplies probably fell for the fifth time in six weeks as refinery operations stayed near a five-year high and imports declined, a Bloomberg survey showed. Stockpiles decreased 1 million barrels, or 0.3 percent, to 379.1 million in the seven days ended July 27, according to the median of 11 analyst estimates before an Energy Department report tomorrow.