Oil prices dropped below US$124 a barrel yesterday in Asia as demand concerns deepened and after US Federal Reserve Chairman Ben Bernanke indicated that more US interest rate cuts are unlikely.
Bernanke’s comments suggesting inflation is too much of a concern to contemplate more rate hikes sent the dollar higher and raised questions about oil’s ability to reach new highs in the short term.
Bernanke signaled the Fed is inclined to leave rates where they are for now, but some analysts said he might be taking a step toward an eventual rise in rates later this year or early next year.
Midafternoon in Singapore, light, sweet crude for July delivery was down US$0.66 at US$123.65 a barrel in NYMEX electronic trading. The contract fell US$3.45 to settle at US$124.31 a barrel in the previous session.
That was oil’s lowest settlement price for a front-month contract on the NYMEX since May 15. Prices are now more than US$11 below the trading record of US$135.09 a barrel hit on May 22.
Evidence continues to mount that oil prices amounting to nearly twice what they did a year ago have cut demand.
The latest MasterCard Spendingpulse survey found that demand for gasoline in the US fell by 4.7 percent last week — which included the long Memorial Day holiday weekend — compared with the same week last year. Averaged over the last four weeks, demand was down 6 percent last week compared with last year.
That dovetails with recent data from the US Energy Department and Federal Highway Administration, as well as several other surveys suggesting high prices are cutting Americans’ appetite for fuel. The US is by far the world’s largest consumer of energy and oil products, and swings in demand there can have an outsized impact on global prices.
“Investors are ... wondering if we’ve got to the point, with prices around US$130 a barrel, if that’s too much for consumers to bear,” said Rachel Ziemba, an analyst at RGEMonitor.com in New York.
Also weighing on prices was the strengthening dollar, which bounced higher on Bernanke’s comments in his speech via satellite to an international monetary conference in Spain.
Since last year, a series of Fed cuts designed to shore up the economy has led to a protracted decline in the dollar’s value against the euro. That helped feed the record run-up in oil prices as investors bought commodities such as oil as a hedge against inflation.
But when the dollar strengthens, the effect reverses, and oil fell on Tuesday as the dollar gained against the euro and yen.
In currency trading early yesterday afternoon in Tokyo, the dollar had weakened slightly to around 104.80 to the yen, while the euro was slightly stronger near US$1.5470.
“With Bernanke implying that there won’t be ... more interest rate cuts, that removes one contributing factor that’s been driving oil prices,” Ziemba said.
Oil prices also fell on forecasts that US oil and fuel supplies rose last week. Analysts polled by energy research firm Platts expect the US Energy Department to report that oil inventories rose by 2.7 million barrels last week. The department’s Energy Information Administration was to issue its weekly inventory report later yesterday.
‘FORM OF PROTEST’: The German Institute Taipei said it was ‘shocked’ to see Nazi symbolism used in connection with political aims as it condemned the incident Sung Chien-liang (宋建樑), who led efforts to recall Democratic Progressive Party (DPP) Legislator Lee Kun-cheng (李坤城), was released on bail of NT$80,000 yesterday amid an outcry over a Nazi armband he wore to questioning the night before. Sung arrived at the New Taipei City District Prosecutors’ Office for questioning in a recall petition forgery case on Tuesday night wearing a red armband bearing a swastika, carrying a copy of Adolf Hitler’s Mein Kampf and giving a Nazi salute. Sung left the building at 1:15am without the armband and apparently covering the book with a coat. This is a serious international scandal and Chinese
PERSONAL DATA: The implicated KMT members allegedly compiled their petitions by copying names from party lists without the consent of the people concerned Judicial authorities searched six locations yesterday and questioned six people, including one elderly Chinese Nationalist Party (KMT) member and five KMT Youth League associates, about alleged signature forgery and fraud relating to their recall efforts against two Democratic Progressive Party (DPP) legislators. After launching a probe into alleged signature forgery and related fraud in the KMT’s recall effort, prosecutors received a number of complaints, including about one petition that had 1,748 signatures of voters whose family members said they had already passed away, and also voters who said they did not approve the use of their name, Taipei Deputy Chief Prosecutor
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
COUNTERINTELLIGENCE TRAINING: The ministry said 87.5 percent of the apprehended Chinese agents were reported by service members they tried to lure into becoming spies Taiwanese organized crime, illegal money lenders, temples and civic groups are complicit in Beijing’s infiltration of the armed forces, the Ministry of National Defense (MND) said in a report yesterday. Retired service members who had been turned to Beijing’s cause mainly relied on those channels to infiltrate the Taiwanese military, according to the report to be submitted to lawmakers ahead of tomorrow’s hearing on Chinese espionage in the military. Chinese intelligence typically used blackmail, Internet-based communications, bribery or debts to loan sharks to leverage active service personnel to do its bidding, it said. China’s main goals are to collect intelligence, and develop a
RSS