Followup (AIN) -Oil futures on Friday saw their largest daily drop in almost three weeks as the U.S. Federal Reserve’s decision to keep interest rates unchanged raised worries about the U.S. economy—and energy demand.
Prices failed to find much support even after data released Friday showed a third straight weekly decline in active U.S. oil-drilling rigs.
October West Texas Intermediate crude CLZ5, -4.03% settled at $44.68 a barrel, down $2.22, or 4.7%, on the New York Mercantile Exchange. Prices, which suffered from their largest daily point and percentage loss since Sept. 1, settled a nickel, or 0.1%, higher than the week-ago settlement of $44.63.
On London’s ICE Futures exchange, November Brent crude LCOX5, -2.97% fell $1.61, or 3.3%, to $47.47 a barrel, with the contract losing 3.2% for the week.
In the immediate aftermath of the U.S. central bank’s late Thursday decision, the U.S. dollar DXY, +0.69% weakened, which should have been supportive for dollar-denominated oil prices.
“Ironically, oil prices slumped at the Fed announcement, suggesting that traders in oil responded to the weak economic outlook and no inflation,” said Jeff Born, a professor from the D’Amore-McKim School of Business at Northeastern University.
“Oil prices generally don’t benefit from uncertainty or instability, so this price reaction is most understandable,” he told MarketWatch in an email. “Oil price weakness this year is reflecting slowing economic activity in Europe and Asia, combined with production by Middle East producers,” who are intent on blunting the gains in energy-market share made by the USA.
In a statement Thursday, Fed Chairwoman Janet Yellen said “the outlook abroad appears to have become more uncertain of late, and heightened concerns about growth in China and other emerging-market economies have led to notable volatility in financial markets.”
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Continued market speculation of a rate increase will likely feed price volatility in coming weeks, analysts said.
On Friday, Baker Hughes BHI, -3.29% said the number of active U.S. oil-drilling rigs fell a third week in a row, down 8 to 644 as of Sept.18.
Meanwhile, the U.S. House Energy and Commerce Committee voted 31-19 on Thursday to approve legislation for lifting a four-decade ban on U.S. oil exports. The full House of Representatives votes on the bill in a couple weeks.
Supporters of the lift say allowing unfettered domestic oil exports would eliminate market distortions, streamline U.S. petroleum production and stimulate the domestic economy. Opponents argue it could increase gasoline costs for U.S. consumers.
On Nymex, October gasoline RBV5, -1.24% fell 2 cents, or 1.4%, to $1.356 a gallon—down about 1% from the week-ago close. October heating oil HOV5, -2.17% fell 3.9 cents, or 2.6%, to $1.491 a gallon, with the contract down about 3.8% for the week.
October natural gas NGV15, -1.77% ended at $2.605 per million British thermal units, down 4.7 cents, or 1.8%, losing around 3.3% on the week./End/