Nymex Crude Falls as Stimulus Hopes Fade
Crude-oil futures eased 1% Thursday as market soured on the likelihood of Federal Reserve stimulus actions, analysts and traders said.
Light, sweet crude for October delivery settled down 99 cents, or 1%, at $96.27 a barrel on the New York Mercantile Exchange. October Brent crude on ICE Futures Europe settled up 10 cents, or 0.1%, at $115.01 a barrel.
Two high-profile voices threw cold water on the idea of additional monetary stimulus from the Federal Reserve.
The president of the St. Louis Federal Reserve Bank, James Bullard, said in an interview Thursday with CNBC that the probability of further stimulus from the Fed is "not as high" as the market expects.
Later in the day, Mitt Romney, the presumptive Republican presidential candidate, told the Fox Business Network that he didn't support the Fed's last round of bond-buying and thinks another would be "the wrong way to go."
The renewed doubt in the market that stimulus could be implemented "seemed to precipitate a pretty aggressive little fall" in oil futures, said Peter Donovan, vice president of Vantage Trading and a Nymex floor broker.
Though Mr. Romney doesn't currently hold a government position, his comments still had "psychological" influence in the market, Mr. Donovan said.
"Any opposition to stimulus certainly would have a little bit of a negative effect on the price of oil."
Stimulus measures benefit oil and oil-based products in two ways. Any increase in economic activity would spur demand for oil in the U.S., the world's largest oil consumer. Also, such measures, which are tantamount to printing money, would lower the value of the dollar and dollar-denominated crude oil. That would make crude cheaper for buyers of other currencies.
Investors are also cautiously eyeing Europe, where Greece is in ongoing meetings with euro-zone leaders about the terms of the country's bailout. German Finance Minister Wolfgang Schaeuble said on German radio Thursday that additional time to meet bailout requirements, as Greece is requesting, won't help the country solve its problems.
Schaeuble's comments "tempered" market hopes for successful bailout negotiations, said John Kilduff, a founding partner of Again Capital.
But oil prices, which have increased 9.4% since Aug. 1, could still have room to rally, said Ray Carbone, president of Paramount Options, a brokerage company. "Given the trajectory that crude has been on, it's just a little bit of a setback," he said.
Reformulated gasoline blendstock, or RBOB, and heating oil both ended higher on the day, following stronger prices in Brent crude.
Front-month September RBOB rose 1.16 cents, or 0.4%, to $3.1158 a gallon. September heating oil rose 0.43 cent, or 0.1%, to $3.1330 a gallon.
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