Oil prices on Friday sank after the US Federal Reserve expressed doubts about the strength of the global economy as it held off from an interest rate hike.
US benchmark West Texas Intermediate for delivery in October dropped US$2.22 to US$44.68 a barrel from Thursday’s close.
Brent North Sea crude for November delivery lost US$1.61 to US$47.47 a barrel in London trade.
Photo: AP
The Federal Reserve held its key interest rate locked near zero on Thursday, citing worries about how the slowdown in China will hit the US economy.
“China is weighing on the demand side. Everything that is negative out of China is even more bearish than I am,” said James Williams of WTRG Economics. “We are still in an oversupplied market by at least 1.5 million barrels a day.”
Oil prices had surged on Wednesday after the US Department of Energy revealed a 2.1 million barrel drop in inventories, fueling hopes of a pick-up in demand in the world’s biggest economy.
“In the case of oil, the expected fall of US output should in theory help to support prices, even if major upward moves seem unlikely for the foreseeable future,” Gain Capital analyst Fawad Razaqzada said.
GOLD: The Federal Reserve just rescued gold, at least for a while.
Bullion is headed for the first weekly gain in four after the Federal Open Market Committee (FOMC) decision fueled debate over the strength of the US economy. That is good news for gold bulls, who have suffered through more than two years of declining prices.
“Ultimately, lower-for-longer on the rate front will boost precious metals,” Sydney-based Australian Bullion Co chief economist Jordan Eliseo said by e-mail on Friday. “Gold rallied as the FOMC appeared very dovish — with noticeable concern regarding the outlook for growth and inflation.”
Prices rallied as much as 1.3 percent to US$1,133.93 on Thursday, the highest since Sept. 3. Bullion for immediate delivery traded 0.1 percent lower at US$1,130.07 an ounce at 2:07pm in Singapore, paring this week’s advance to 2 percent, according to Bloomberg generic pricing.
Bullion of 99.99 percent purity added 0.8 percent to 232.17 yuan a gram (US$1,135.01 an ounce) on the Shanghai Gold Exchange.
Platinum for immediate delivery fell 1 percent to US$974.59 an ounce, while palladium dropped 0.6 percent to US$607.10 an ounce.
Silver lost 0.3 percent to US$15.1015 an ounce, trimming a 3.3 percent weekly gain, the most since May 15.
BASE METALS: Copper futures had the steepest weekly drop in almost two months as the Federal Reserve’s decision keep interest rates unchanged highlighted concern over the resilience of global economic growth.
Officials are watching developments in China and emerging markets, Fed Chair Janet Yellen said Thursday.
While the Fed opted to keep rates near zero, she said most policymakers expect to raise borrowing costs this year. China accounts for more than 40 percent of global copper demand.
“Rather than focusing upon the commercial benefits of lower costs of finance, the market has chosen to hone in upon the global economic fragility that discouraged the rate hike in the first place,” New York-based BGC Partners Inc head of base metals Michael Turek said in an e-mail.
Copper futures for December delivery slipped 2.7 percent to settle at US$2.386 a pound at 1:18pm on the Comex in New York. Prices were down 2.8 percent this week, the biggest such loss since July 24. On the London Metal Exchange (LME), copper for delivery in three months declined 2.5 percent to US$5,254 a tonne.
On the LME, tin, nickel, aluminum, zinc and lead also dropped.
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