Brent hits 18-month low on modest Fed action
Singapore, June 21, 2012
Brent crude fell to its lowest in 18 months on Thursday at around $92 a barrel on demand growth concerns as China's factory sector slowed and as the US Fed's stimulus plan dashed hopes for more aggressive steps to boost the world's top economy.
An unexpected rise in US crude inventories last week also hit Brent, which has slid 28 percent from this year's peak above $128 touched in March.
The Federal Reserve on Wednesday extended until year-end its current program of selling short-term bonds and buying longer-dated ones to bring down borrowing costs, instead of launching a third round of outright bond purchases.
While Fed chairman Ben Bernanke said the US central bank was ready to do even more to help an increasingly fragile US recovery, many investors hoping for a third round of quantitative easing which would have boosted investment flows into riskier assets, like oil, were disappointed.
"In addition to the technical weakness of the market, the weak FOMC action has put more downside pressure on prices," said Ken Hasegawa a commodity sales manager at Newedge Japan.
"The US economy is not in good shape. You add Europe and poor demand supply situation, and the picture gets much worse. I can't see any support for crude prices now, it's all very bearish."
Brent crude for August delivery fell 56 cents to $92.13 a barrel by 0254 GMT, after falling to as low as $91.98, its weakest since Dec. 20, 2010. Front-month U.S. crude was down $1.11 cents to $80.34 a barrel, after earlier hitting an eight-month low of $80.39.
China's factory sector contracted for an eighth-straight month in June with export orders seen at the weakest since early 2009, according to the HSBC Flash Purchasing Managers Index, the earliest monthly indicator of China's industrial activity.
"Obviously any indication that the Chinese economy is slowing more than expected will put further pressure on oil prices, and commodities," said Michael Creed, an economist at National Australia Bank. - Reuters