Oil rises past $106 ahead of Fed policy decision

Published on NewsOK Modified: September 18, 2013 at 6:45 am •  Published: September 18, 2013
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The price of oil recouped some recent losses and rose to over $106 a barrel Wednesday as traders prepared for an expected reduction in the U.S. Federal Reserve's massive monetary stimulus.

By early afternoon in Europe, benchmark oil for October delivery was up 66 cents to $106.08 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.17 to close at $105.42 on Tuesday. Oil fell $1.62 on Monday.

Following the 2008 financial crisis, the U.S. central bank has been buying bonds and other assets to push down interest rates and make loans more available. Global stocks and commodities surged as the new money generated by the unconventional program, which is currently running at $85 billion a month, flowed through the financial system.

The Fed, however, is widely expected to begin winding down the program as the U.S. economy shows signs of a sustained albeit gradual recovery and could announce the first reduction on Wednesday following a two-day policy meeting.

The prospect of a reduction in stimulus pushed down oil prices earlier this week, but now traders are looking ahead, seemingly less fearful of the impact of "tapering," since analysts believe the Fed will keep official interest rates low to keep the U.S. economy chugging along.

Analysts at Capital Economics said in a commentary that "a small reduction is probably now discounted and the Fed may choose to reiterate its conditional commitment to keep interest rates very low for a long period."

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