By Chris Flood
Published: February 19 2010 12:11 | Last updated: February 19 2010 12:11
Crude oil prices fell on Friday while base metals moved lower and gold dipped as the dollar strengthened after the US Federal Reserve, in a surprise move, announced that it would raise the discount rate it charges banks.
Stuart Green, global economist at HSBC, said the timing of the Fed’s move represented a surprise.
“The early move suggests that the Fed are keen to actively manage the process of normalising policy, in order to provide more time to evaluate the impact of each measure taken,” said Mr Green.
HSBC said the key issues were whether the Fed’s move signalled a broader shift in monetary policy and the possible implications for liquidity provision and risk appetite on a global basis.
“We believe this move does not represent a shift in monetary policy and the Fed’s own statement was keen to stress as much ... highlighting that the action does not signal ‘any change in the outlook the economy or for monetary policy’,” said Mr Green.
Crude oil prices fell, with Nymex March West Texas Intermediate down $1 to $78.06 a barrel while ICE April Brent lost $1.03 at $76.75 a barrel.
US weekly inventories data, released on Thursday, showed that crude stocks rose 3.1m barrels last week, above the consensus forecast for an increase of 2.2m barrels.
Imports of crude oil rose 206,000 barrels a day last week to average 8.55m b/d.
The increase in imports swamped a small improvement in demand from refineries, with refinery utilisation up 0.7 percentage points to 79.8 per cent.
Petrol inventories rose 1.7m barrels, slightly above the consensus forecast for an increase of 1.5m barrels.
Nymex March RBOB unleaded gasoline traded 2.7 cents lower at $2.0425 a gallon.
Distillate stocks (including heating oil) fell 2.9m barrels, almost double the consensus forecast for a drop of 1.5m barrels.
Nymex March heating oil fell 2.5 cents to $2.0268 a gallon.
Eugen Weinberg, commodity strategist at Commerzbank, said base metals were managing to hold up relatively well in view of dollar’s strength.
“We do not expect that the Fed’s move will have the same impact as China’s measures to cool down its partly overheated economy could have,” said Mr Weinberg.
Copper lost 1.2 per cent at $7,200 a tonne while aluminium also fell 1.2 per cent to $2,095 a tonne.
Gold traded at $1,108 a troy ounce after ending Thursday in New York at $1,123.05, under pressure from strength in the dollar.
