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Oil Falls, Bernanke’s Speech Eyed

Crude oil future prices inch lower; Concerns over hurricane in the U.S. loom

August 27, 2011 3:22 by

Oil prices fell on Friday as

analysts played down expectations of further quantitative easing

ahead of a speech by U.S. Federal Reserve Chairman Ben Bernanke

on the health of the world’s largest economy and top oil


Brent crude futures  were 59 cents lower at $110.03 a

barrel as of 1239 GMT. U.S. light crude futures  were down

$1.05 cents to $84.25 a barrel.

All eyes were on Bernanke’s speech in Jackson Hole, Wyoming

scheduled for 1400 GMT, with markets eager to hear what the

Fed’s plan is to help a struggling U.S. economy, although the

consensus was that its options are limited.

“Today the focus will be on Ben (Bernanke) and (hurricane)

Irene, and one is as unpredictable as the other,” said

Petromatrix’s Olivier Jakob.

At last year’s meeting, Bernanke hinted at what eventually

became a $600 billion quantitative easing bond-buying


“The key question is whether Bernanke will announce a

further round of quantitative easing of U.S. monetary policy, as

he did last year,” Commerzbank analysts said.

“We do not expect such an announcement, however, and oil

prices could come under pressure as a result. The price rally of

past days was mainly due to the expectation of further


Some price support came from Hurricane Irene as it barrelled

towards U.S. East Coast refineries, posing a potential threat to

supply; while the ongoing conflict in OPEC member Libya and

international pressure on Syria also underpinned sentiment.

But worries about the outlook of the faltering recovery

remained high on the agenda. Deutsche Bank joined a growing

chorus of banks in downgrading oil price forecasts, trimming its

Brent forecast for 2011 to $112 a barrel from $114 a barrel and

U.S. light crude to $94 a barrel from $100.

“We now believe that the economy is likely to grow more

slowly in 2011-2012,” Deutsche Bank’s Adam Sieminski said in a


A Reuters poll of analysts meanwhile showed that oil prices

are likely to stay above $100 a barrel next year despite

increasing downward pressure from the expected return of some

Libyan production and fears of a double-dip recession.


Economic worries on the other side of the Atlantic also kept

investors on edge. The Spanish economy grew at a slower pace in

the second quarter than the first, fuelling concerns Spain could

slip back into recession if the euro zone economy continues to


German consumer sentiment fell slightly going into

September, hitting a 10-month low as the euro zone debt crisis

and fears of another recession in Europe and the United States

weighed on consumer expectations, a survey


Hurricane Irene, a Category 3 storm that lashed the

low-lying Bahamas on Thursday, was expected to hit North

Carolina on Saturday before heading up the coast to New York and


MF Global said in its daily report that it expected

refineries in the path of the hurricane to withstand the winds

from the storm and not shut down for now.

While the East Coast region has no major offshore oil and

gas production like the hurricane-prone Gulf Coast, the stakes

are still high.

The region has around a dozen nuclear plants and a massive

oil delivery hub at New York Harbor. Its pipelines and power

networks serve more than 100 million Americans.

“The biggest issue may be flooding if the storm surge brings

water up into New York Harbor. The harbor imports 400 kb/d in

gasoline,” the MF Global report said.


In Libya, rebels stormed Tripoli’s Abu Salim district, one

of the main holdouts of forces loyal to Muammar Gaddafi, after a

NATO air strike on a building in the area, a Reuters

correspondent said.

The Libyan rebel government hopes to restart oil exports

within two to three months and reach full volumes in about a

year, Ali Tarhouni, the official in charge of financial and oil

matters, told Reuters from Libya’s oil ministry in Tripoli.

Traders said that it had become more difficult to sell

Syrian crude this month in the European spot market due to U.S.

sanctions on Syria and expectations EU sanctions may


But oil major Royal Dutch Shell is planning to continue

exporting Syrian oil in September despite fresh U.S. sanctions

and a looming EU embargo.

(Reporting by Seng Li Peng in Singapore and Zaida Espana in

London; Editing by Jason Neely)


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