Oil below $112 ahead of Bernanke news conference

[April 27, 2011]  SINGAPORE (AP) -- Oil prices dropped slightly to below $112 a barrel Wednesday in Asia as traders awaited comments from Federal Reserve Chairman Ben Bernanke about U.S. interest rates and economic growth.

Benchmark crude for June delivery was down 35 cents at $111.86 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost 7 cents to settle at $112.21 on Tuesday.

In London, Brent crude for June delivery was down 18 cents to $123.96 a barrel on the ICE Futures exchange.

Traders will be closely watching a Bernanke news conference after the Fed meeting finishes later Wednesday. They hope for hints about whether the central bank will extend a program of buying Treasuries known as quantitative easing that has helped spur lending and economic growth and contributed to a 50 percent surge in oil prices since August.

When Bernanke announced the Fed's quantitative easing plan in August, oil was about $75 a barrel. Loose U.S. monetary policy has helped weaken the dollar and has been one of several factors behind the surge in oil prices.

"Most people seem to expect that the Fed is finished with quantitative easing, but that it will be adamant about preserving the existing low interest rate regime," Cameron Hanover said in a report. "The stock market and housing market would implode if he raised interest rates suddenly."

A U.S. energy supply report showed mixed signs about demand. The American Petroleum Institute said late Tuesday that crude inventories rose 4.9 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast an increase of just 1.6 million barrels.

However, inventories of gasoline dropped 2.1 million barrels, the API said.

The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.

In other Nymex trading in May contracts, heating oil fell 0.5 cent to $3.21 a gallon and gasoline dropped 0.7 cent to $3.35 a gallon. Natural gas futures were up 0.1 cent at $4.39 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

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