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Crude Prices Dip on Speculation of Further Fed Tapering (OIL) (USO)

January 2, 2014 3:01 PM EST
Crude oil prices are lower Thursday following the New Year holiday as speculation mounts that the Fed will taper its bond-buying and low interest rate program even more over the next few months.

Thursday morning, the U.S. Labor Department reported an unexpected drop in initial unemployment claims to 339,000 for the week ended December 28th. The number compares with 341,000 reported that prior week and expectations for a tick higher to 344,000 apps.

Another report has the Institute for Supply Management's factory index at 57.00 in December, from 57.3 the prior month and the second-fastest rate of expansion in over two years for the U.S.

On Friday, the Energy Information Administraiton (EIA) is expected to report a 2.83 million barrel drop in stockpiles to 364.7 million last week.

Last month, the Fed began is tapering process by cutting $10 billion from its monthly open-market activity. Rates are still at record lows, though the market is beginning to price in the end to that as well, as can be evidenced by recent mortgage rates.

Commodities like oil that are denominated in U.S. dollars become less-appealing to outside investors as the currency strengthens.

February 2014 contracts fell $2.88 to $95.54 per barrel on the Comex in the afternoon session.

On watch today are United States Oil (NYSE: USO) and iPath S&P GSCI Crude Oil TR Index (NYSE: OIL), among other exchange-traded products.


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