Curious About Oil Prices? Watch The Fed

LONDON –

Although supply worries pushed oil prices close to a record of $120 per barrel on Monday, the real guide to crude for the rest of the week could be the United States Federal Reserve.

The American central bank is due to meet on Tuesday and Wednesday to decide its next move on monetary policy, which could have an impact on oil prices. The Fed’s attempts to revive the flagging American economy over the past six months–including cutting interest rates down to 2.25%–have pushed the dollar down to historically weak levels against the euro and other major currencies. With equity markets in turmoil, the investments currently benefiting from dollar desertion are commodities like crude oil.


“That has actually been the case over several months–the Fed seems to have a disproportionate impact on the oil price,” said Simon Wardell, analyst with Global Insight, “with the impact of the dollar and the outlook for it.” But he acknowledged that supply worries were mainly behind Monday’s early jump in oil prices.

Forbes