Oil prices fall after Fed hints at December rate hike

Crude oil futures fell on Thursday as the dollar strengthened on signs the Federal Reserve may raise U.S. interest rates in December.

U.S. crude <CLc1> was down 55 cents at $45.39 a barrel at 0600 ET. Brent crude <LCOc1> fell 58 cents to $48.47 a barrel.

The dollar held strong near 2-1/2-month highs against the euro on Thursday, after the Fed signaled it may not wait until next year to raise rates, highlighting the divergent monetary policies of the world’s most influential central banks.

“In just a couple of weeks the Fed seems to be less concerned about China and expectations are therefore again rising for an interest rate hike in December,” Petromatrix consultancy’s Oliver Jakob said.

On Wednesday, Brent and U.S. crude rose by 5-6 percent – a rally that analysts struggled to explain even after U.S. government data showed a draw in total stocks.

“The U.S. weekly report can be taken on the positive side but the rally of yesterday started before the release of the weekly report and was a sub one-minute affair during which crude oil gained more than $1 per barrel,” Jakob said.

“We are not sure what was behind that one-minute flash surge but it was definitively an unusual trading pattern.”

U.S. crude stocks rose last week, while gasoline and distillate inventories fell more than expected.

Crude inventories climbed in line with trader expectations but the build-up was less than the 4.1-million-barrel increase reported by the American Petroleum Institute, an industry group, a day earlier.

Stockpiles at the Cushing, Oklahoma delivery hub for U.S. futures fell by 785,000 barrels, giving a bullish tone to the report.

“The crude stock story might gain further momentum as despite a year-on-year fall of just over 1,000 rigs in the Baker Hughes oil rig count, we would caution that the widely expected fall in U.S. crude oil production could be significantly lower than many are expecting,” JBC Energy consultancy said in a note.

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