Crude falls as market awaits Federal Reserve policy decision

Crude oil futures fell in Asian trading on Wednesday as investors continued to sell the commodity for profits ahead of a two-day Federal Reserve monetary policy meeting that may lead to monetary stimulus measures. On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at USD97.00 a barrel on Wednesday, down 0.17%, off from a session high of USD96.95 and up from an earlier session low of USD96.86. The U.S. Bureau of Labor Statistics reported Friday that the U.S. economy created a net 96,000 nonfarm payrolls in August, well below market calls for 125,000 jobs. The weak jobs numbers fueled already growing sentiment that the Federal Reserve will roll out a third round of quantitative easing at two-day monetary policy meeting that starts today. Under quantitative easing, the Fed buys assets such as Treasury holdings or mortgage-backed securities held by banks, pumping the economy full of fresh liquidity in a way that pushes down interest rates to encourage investing and hiring. Such accommodative policies tend to weaken the dollar by design and send commodities prices rising, especially oil, which shoots up on hopes for sustained demand that comes from a jolted economy and also due to a weaker dollar, which makes the commodity a nicely-priced asset in the eyes of investors holding other currencies. However, investors sold the commodity for profits to wait for a formal announcement. Meanwhile, Moody's Investors Service said the U.S. could lose its coveted triple-A rating if its doesn't find a way to narrow deficits and pay down debts. At the end of 2012, a series of tax cuts and other benefits expire at the same time preprogrammed cuts to government spending take effect, and the combination of the two taking place simultaneously could send the U.S. into a recession in 2013, according to studies from the nonpartisan Congressional Budget Office. Investors also kept a cautious eye on Germany, where a court ruling is due out on Wednesday on whether the eurozone's permanent bailout fund, the European Stability Mechanism, is compatible with German law. The European Central Bank needs Germany's participation to push through its recently announced sovereign bond purchasing program, known as Outright Monetary Transactions, which aim to lower borrowing costs in debt-ridden periphery countries. An anti-bailout ruling could send oil falling on fears the European debt crisis could heat up anew and bruise an already battered eurozone economy, crimping demand for energy and fuels in the process. On the ICE Futures Exchange, Brent oil futures for November delivery were up 0.12% and trading at USD114.67 a barrel, up USD17.67 from its U.S. counterpart.

Courtesy: ForexPros