London: Oil fell on Wednesday, pressured by anxiety about the global economy after the Federal Reserve warned that turmoil in Europe threatened the US economy but failed to take any new steps to stimulate growth.
Market participants were awaiting the outcome of a meeting of oil cartel Opec, which is expected to reset a production limit for the first time in three years and settle an argument over output levels in Saudi Arabia’s favour.
Brent crude fell 35 cents to $109.15 a barrel by 03:00 pm, retreating after a sharp gain. US crude slipped 33 cents to $99.81. Both contracts gained sharply on Tuesday.
Some investors had speculated that the Fed might show more urgency about moving ahead with new measures to help the economy, and disappointment that it did not pushed demand-sensitive assets like oil lower.
“There’s a softer tone because of disappointment that the Fed didn’t do anything, but they were never going to,” said Michael Hewson, analyst at CMC Markets.
“The Fed are keeping their powder dry in case things in Europe get worse, because they will.”
Debt markets were on edge ahead of a planned sale by in Rome of up to €3 billion of new five-year bonds - Italy’s first sale of longer-term debt since the European Union took steps towards greater fiscal integration last week.
Yields at the auction look set to mark new euro-era highs.
Investors were watching statements coming out of the Organization of the Petroleum Exporting Countries meeting in Vienna to gauge supply outlook.
The expected agreement would put a 30-million barrel-a-day cap on output for all 12 Opec members for the first half of the year, keeping production near three-year highs.
Tensions remain high between Iran and western powers over the Islamic Republic’s nuclear programme, a factor which is supporting oil prices on fear of supply disruption.
Iran will move its uranium enrichment plants to safer sites if conditions make this necessary, the semi-official Mehr news agency on Wednesday quoted a senior Revolutionary Guards commander as saying.
Oil was also under pressure from an industry report that showed crude stocks in the world’s largest consumer, the United States, rose 462,000 barrels in the week to 9 December, compared with analysts’ expectations for a fall of 2 million barrels.
Distillate stocks rose 1.2 million barrels versus a forecast for an 800,000-barrel gain.
Commercial crude stockpiles are expected to have fallen last week due to lower imports and end of the year destocking, an expanded Reuters poll of analysts showed on Tuesday.