AP: Oil dips ahead of supply report, Fed announcement
Oil prices fell Wednesday ahead of the weekly government report expected to show a drop in crude supplies.
There is a lot of uncertainty about how much demand there is for crude, which could indicate the beginning of an economic rebound and potentially an upward swing in prices for energy.
An American Petroleum Institute survey released late Tuesday said crude actually increased by hundreds of thousands of barrels, which is at odds with the 2.25 million-barrel drop expected by analysts polled by Platts, the energy information arm of McGraw-Hill Cos.
Benchmark crude for November delivery fell $1.27 $71.49 a barrel on the New York Mercantile Exchange. The contract added $1.83 a barrel to settle at $71.76 on Tuesday.
But the results of the Federal Reserve meeting later Wednesday could have a bigger effect on oil prices.
Even with supplies more than ample, oil prices have remained high because of the weakening U.S. dollar.
Crude is priced in dollars so it becomes cheaper when the dollar falls. The dollar is at a nearly one-year low against the euro.
To combat the worst recession since the 1930s, the Federal Reserve has kept interest rates at a record low — near zero — and started an assortment of programs designed to encourage borrowing. Critics have complained that the Fed appears to be printing money to pay for the government's spending binge, and that hurts the dollar.
The Fed is expected to keep interest rates the same, but traders will be watching for hints that it may begin to rein in any programs designed to support the economy.
Prices at the pump fell 0.4 cents overnight to $2.54 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 8.6 cents below levels of a month ago and $1.186 down from year-ago levels.
In other Nymex trading, gasoline for October delivery fell 4.25 cents to $1.7391 a gallon, and heating oil lost 1.5 cents to $1.797 a gallon. Natural gas rose 15.6 cents to $3.765 per 1,000 cubic feet.
In London, Brent crude fell $1.17 to $69.36 on the ICE Futures exchange.
