Oil prices mixed before Fed meeting

Monday 27 January 2014 15.08
Oil traders focus on outcome of US Federal Reserve meeting
Oil traders focus on outcome of US Federal Reserve meeting

Global oil prices diverged today as dealers focused on the US Federal Reserve's upcoming policy meeting in anticipation of a further scaling back of Fed stimulus. 

Brent North Sea crude for delivery in March shed 61 cents to stand at $107.27 a barrel in London afternoon deals. 

New York's main contract, West Texas Intermediate (WTI) for March, added 43 cents to $97.07 a barrel.

Trading volumes remain thin, however, as markets wait to see if the Fed's Federal Open Market Committee (FOMC) will cut $10 billion from monthly asset purchases when it meets tomorrow and Wednesday. 

Analysts said that investors were sitting on the sidelines amid heightened anticipation that the Fed will further engage in tapering". 

The Fed's FOMC this month began tapering the stimulus by $10 billion to $75 billion a month. 

The so-called tapering of the Fed's asset purchases would likely boost the greenback, making dollar-priced oil more expensive for countries using other currencies, dampening demand.

But analysts said in the long-term, the move would signal better prospects for crude oil as it indicated the Fed's confidence in the US economy, which would translate into stronger demand. 

He added that investors were also closely monitoring developments following the recent opening of the Southern leg of the controversial Keystone XL pipeline in the US. The $2.3 billion pipeline last week started carrying crude 785km from Cushing in Oklahoma to Gulf Coast refineries in the southern state of Texas.

The pipeline's initial transportation rate of 300,000 barrels per day, about half of its maximum capacity, has so far disappointed investors.