Modest gains in oil prices amid lackluster trading in anticipation of ahead of Fed

19-Jun-13

Brent crude oil futures for August delivery inched up to US$106 per barrel, while oil on the Nymex settled higher at US$98.4 per barrel. Brent oil slipped from a 11 week high set in the previous session and U.S. crude oil dropped from a nine-month high. The markets have seen lackluster trading in anticipation of the Federal Reserve's policy statement that will reveal any reduction in its monetary stimulus. Global financial markets have been volatile since Fed Chairman suggested possible pulling back of its stimulus program. To help support the U.S. economic recovery, the Fed has been buying US$85 billion in bonds every month in an attempt to keep long-term interest rates low and encourage lending. The new money generated has flowed into the financial system, helping many assets, including oil, to climb from the lows witnessed during the global recession following the 2008-2009 financial crisis. The Fed’s three quantitative-easing schemes have buoyed prices of commodities as they pumped liquidity into the market and lowered the value of the dollar, making greenback-traded commodities cheaper for investors in foreign currencies.