|
 The Fed said Tuesday it was lowering its key federal funds rate by three-quarters of a percentage point as it tries to stave off a severe economic crisis. Many investors expected a full point cut, but the Fed indicated it was concerned about higher inflation even as it was trying to shore up the economy.
"With (Tuesday's) 75-basis-point reduction in key short-term interest rates, the Fed continues its eight month trend of loosening credit which will, in turn, continue the downtrend in the value of the dollar," wrote Platts Chief Economist Larry G. Chorn in a research note.
In the past several months, rate cuts have fed oil price rallies as investors have bought crude futures to hedge against inflation and the declining dollar. Also, oil futures are priced in dollars, which makes them cheaper for foreign investors as the greenback falls.
The rate reduction by the Fed "could result in oil prices rising to the $112 to $115 (a barrel) range over the course of the next weeks, assuming the other (Group of 10 industrial nations') central banks hold their rates constant," Chorn wrote.
Light, sweet crude for April delivery dropped 78 cents to $108.64 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract rose $3.74 to settle at $109.42 a barrel on Tuesday.
[to top of second column]
 |
 On Monday, oil hit a record trading high for a front-month futures contract at $111.80.
Crude has posted a series of records in recent weeks despite rising supplies and forecasts calling for lower demand growth this year. Later Wednesday, the U.S. Energy Department's Energy Information Administration was expected to report that the nation's crude supplies grew again last week.
The EIA was expected to say that U.S. crude oil inventories rose 2.3 million barrels last week, according to a survey of analysts by Platts, the energy research arm of McGraw-Hill Cos.
Gasoline stocks were projected to fall 200,000 barrels. Inventories of distillates, which include heating oil and diesel, were expected to drop 1.6 million barrels.
In other Nymex trading, heating oil fell 3.29 cents to $3.105 a gallon while gasoline prices lost 2.62 cents to $2.6338 a gallon. Natural gas futures fell 2.8 cents to $9.386 per 1,000 cubic feet.
In London, Brent crude futures fell 78 cents to $104.78 a barrel on the ICE Futures exchange.
[Associated Press; By GILLIAN WONG]
Copyright 2008 The Associated Press. All rights reserved. This
material may not be published, broadcast, rewritten or
redistributed.
|
