Crude Settles Higher, Dollar Be Lower
October 30th, 2007 by Grant in: Economics, Finance, Oil & GasYesterday crude oil settled in above $93 per barrel on production problems in Mexico and a weaker dollar.
Pemex, of Mexico, took 600,000 barrels a day off line due to weather. Most of the problem stems from ports being closed, as they are unable to export any more crude and have run out of storage.
The lost production will likely be made up quickly, but it will certainly draw on U.S. inventory levels in the coming weeks, which should further support prices. Crude is up 10% since Wednesday, when the DOE said in its weekly inventory report that stockpiles fell, contrary to analysts’ expectations for a build.
On Wednesday, the Fed may announce a rate cut by a quarter percentage point, which would be negative for the dollar and is seen as positive for crude oil demand. A bigger-than-expected cut would send prices soaring higher, while no cut at all would likely cause a sell-off.
Evidently it is widely accepted that the Fed will cut rates by a quarter point, which I think is ridiculous at this juncture. I don’t see an additional rate reduction helping the current housing market, and it certainly won’t create more jobs overnight.
I’d love to see the Fed hold the rate at 4.75% and wait until we see how the last reduction has affected consumer spending before chopping the rate further.
Tags: crude oil | dollar | Fed rate cut | interest rates | rates
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