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Oil fell slightly on Thursday as comments from U.S. Federal Reserve Chairman Ben Bernanke dimmed hopes for additional stimulus measures and offset support from a surprise interest rate cut by China.
Crude prices shot higher in early trade on expectations the first rate cut by China since the depths of the global financial crisis would boost demand in the world’s second largest oil consumer.
Prices later slid following Bernanke’s testimony to Congress that offered little encouragement to investors who were hoping the Fed would launch a third round of bond buys, or quantitative easing (QE).
“With China cutting interest rates that was a form of QE3, but Bernanke only threw out a tease and crude prices pulled back,” said Dan Flynn, analyst at Price Futures Group in Chicago.
Past stimulus moves have sent investors into riskier asset classes such as commodities, pushing up prices. Financial markets have been closely watching for any signs of fresh policy steps to bolster the struggling economy. Gold prices dropped 2 percent while equities pared gains.
Brent crude traded down 20 cents to $100.44 a barrel by 1:47 p.m. EDT (1747 GMT), having hit a high of $102.45 a barrel. U.S. crude futures see-sawed, inching up 12 cents to $85.14 a barrel, off earlier highs of $87.03.
After a string of supply disruptions and worries about the loss of Iranian oil due to Western sanctions pushed Brent to 2012 highs over $128 a barrel in early March, concerns about the global economy and the euro zone crisis have sent crude prices tumbling.
Brent dipped below $100 a barrel last week for the first time since October 2011, and both contracts have been below 30 on the 14-day relative strength index — typically a technical sign indicating a commodity has been oversold — since mid-May.
Oil also found early support after a bond sale by Spain met with strong demand, passing a key test of its ability to tap investors after a minister said earlier this week the country was being cut off from the markets.
U.S. jobs data, showing unemployment benefit fell last week for the first time since April, also gave a lift to prices.
© Thomson Reuters