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Jun 21, 2012, 12.20 PM IST
Brent crude fell to its lowest in 18 months on Thursday at around USD 92 a barrel after the US Federal Reserve's modest stimulus plan disappointed investors hoping for more aggressive steps to boost the world's top economy and oil consumer.
An unexpected rise in US crude inventories last week also hit Brent, which has slid 28% from this year's peak above USD 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 economic recovery, many investors who were 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 39 cents to USD 92.30 a barrel by 0151 GMT, after falling to as low as USD 92.06, its weakest since December 20, 2010.
Front-month US crude was down 88 cents to USD 80.57 a barrel, after earlier hitting an eight-month low of USD 80.39.
Poor demand and swelling US crude inventories have built up the supply cushion in the world's biggest market to levels not seen since 1990.
US crude oil stockpiles rose last week by 2.86 million barrels, defying forecasts for a 1.1 million barrel decline, according to data from the US Energy Information Administration.
Investors are also keeping a close watch on the release of China's HSBC flash PMI later in the day which was expected to give a fresh view on the state of the slowdown in the world's second-largest economy.
"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.
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