Crude hovers near $88/bbl after short-term Fed lift

23 January 2008 11:24  [Source: ICIS news]

LONDON (ICIS news)--NYMEX light sweet crude futures fell by a dollar on Wednesday to take the front-month March contract below $89.00/bbl on the back of continued worries over the US economy.

By 9:20 GMT, March NYMEX crude had hit a low of $88.21/bbl, a loss of $1.00/bbl from the Thursday close of $89.21/bbl, before recovering to around $88.30/bbl.

At the same time, March Brent crude on ICE Futures was trading around $87.65/bbl, having hit a low of $87.52/bbl, a loss of $0.93/bbl from the previous close.

Crude oil prices were moving back down after recovering and closing more than a dollar up on Tuesday after the Federal Reserve made a rare emergency cut in interest rates of three quarters of a percentage point.

This was largely viewed as a panic move by the Fed and seemed so far to have had very little lasting impact on global markets considering the substantial cut in interest rates.

Investment banking sources had previously noted that they were expecting the Fed to cut interest rates in their official meeting next week by a further half a percentage point, followed by another half point cut at the end of March.

With crude prices losing substantial ground since the start of the year when prices reached the all time $100/bbl mark, OPEC, which meets next week, will feel little pressure after calls from the US to increase supply.

In its monthly report, OPEC expected a slowdown in demand in 2008 over more evidence of a US recession.

US stock statistics, which will come out on Thursday this week due the US holiday on Monday, helped push prices to their lowest levels since mid-December after showing a much larger than anticipated build in crude.

By: Giovanni Coiro
+44 20 8652 3214

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