Oil falls to around US$112

Oil falls to around US$112 in Europe as traders eye Fed's monetary policy

4/26/2011 4:25:00 AM | Canadian Press (English)

LONDON - Oil prices fell to about $112 a barrel Tuesday as traders eyed a U.S.Federal Reserve meeting this week and worsening violence in Syria.

Benchmark crude for June delivery was down 20 cents at $112.08 a barrel by midday European time in electronic trading on the New York Mercantile Exchange. The contract lost a penny to settle at $112.28 on Monday.

In London, Brent crude for June delivery was up 21 cents to $123.87 a barrel on the ICE Futures exchange.

Traders are mulling how the Federal Reserve may ease a program of buying Treasuries known as quantitative easing that has helped keep the U.S. economy flush with cash.

The Fed meets later Tuesday and Wednesday and Fed Chairman Ben Bernanke is scheduled to hold a news conference at the end of the meeting.

"There can be little doubt that the Federal Reserve's hyper-accommodative monetary policy has caused commodity and asset inflation around the world," said Richard Soultanian of NUS Consulting. "The likely transition of the Fed's monetary policy, albeit gradual, will begin to remove some of the more speculative fervour from the market, bringing prices slowly down."

A weaker dollar and violent political uprising in the Middle East and North Africa have helped push prices up about 33 per cent since mid-February. The euro rose to $1.4620 on Tuesday from $1.4579 late Monday.

Investors are also closely watching escalating violence in Syria. On Monday, thousands of soldiers backed by tanks and snipers attacked suspected anti-government protesters in the southern city of Daraa and other areas, killing at least 11 people. The crackdown since mid-March has killed more than 350 people throughout the country, with 120 alone dying over the weekend.

"While Syria is not an actual oil producer, it has broader ramifications on other countries in the region and could keep oil well bid in the short term," IG Markets in Melbourne said in a report.

In other Nymex trading in May contracts, heating oil fell 1.0 cent to $3.21 a gallon and gasoline slid 1.0 cent to $3.29 a gallon. Natural gas futures were down 1.0 cent at $4.39 per 1,000 cubic feet.

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