Oil eases, eyes modest Fed rate cut

LONDON – Oil was easier near US$88 a barrel yesterday, pressured by expectations that the US Federal Reserve will make only a modest cut in interest rates this week that could be supportive for the US dollar.

US crude was down 12 cents a barrel to US$88,16 by 1013 GMT. London Brent crude fell 25 cents to US$88,39 a barrel.Better-than-expected US employment data on Friday reduced the likelihood of an aggressive 50 basis point interest rate cut by the Federal Reserve today, buoying the dollar.Markets are now pricing in a quarter-point cut, a factor that helped support the dollar near a one-month high against the yen yesterday.A weaker dollar makes most commodities cheaper to buy for non-dollar investors and weakness in the US currency has helped boost oil prices to record highs this year.Oil fell to six-week lows last week after coming close to breaking the US$100 mark in November, boosted by the weak dollar, concerns over falling supplies ahead of winter and speculative inflows.But the market has been moving sideways since the Organisation of the Petroleum Exporting Countries last week agreed to leave its output levels unchanged.”Opec rolled over quotas as we expected; this was constructive, as Opec demonstrated its intent to continue to tightly manage its crude supply,” Mike Wittner, oil analyst at Societe Generale said in a research note.”However, macro concerns about weakening economic and oil demand growth in the US and elsewhere in the OECD – concerns that are shared by Opec and the broader oil markets – offset the rollover and weighed on prices.”Nampa-ReutersLondon Brent crude fell 25 cents to US$88,39 a barrel.Better-than-expected US employment data on Friday reduced the likelihood of an aggressive 50 basis point interest rate cut by the Federal Reserve today, buoying the dollar.Markets are now pricing in a quarter-point cut, a factor that helped support the dollar near a one-month high against the yen yesterday.A weaker dollar makes most commodities cheaper to buy for non-dollar investors and weakness in the US currency has helped boost oil prices to record highs this year.Oil fell to six-week lows last week after coming close to breaking the US$100 mark in November, boosted by the weak dollar, concerns over falling supplies ahead of winter and speculative inflows.But the market has been moving sideways since the Organisation of the Petroleum Exporting Countries last week agreed to leave its output levels unchanged.”Opec rolled over quotas as we expected; this was constructive, as Opec demonstrated its intent to continue to tightly manage its crude supply,” Mike Wittner, oil analyst at Societe Generale said in a research note.”However, macro concerns about weakening economic and oil demand growth in the US and elsewhere in the OECD – concerns that are shared by Opec and the broader oil markets – offset the rollover and weighed on prices.”Nampa-Reuters