Forexpros – Crude oil futures plunged to a four-week low on Thursday, as the Federal Reserve’s grim outlook for the U.S. economy and downbeat Chinese manufacturing data raised concerns over a slowdown in demand from the world’s two largest oil consumers.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at USD83.02 a barrel during European morning trade, plunging 3.37%.
It earlier fell as much as 3.43% to trade at USD82.97 a barrel, the lowest price since August 26.
In a highly anticipated move Wednesday, the Fed said it would buy USD400 billion worth of long-term Treasury bonds by June 2012, while selling an equal amount of short-term debt over the same period, in a move known as ‘Operation Twist’.
That “should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative,” the Fed said in a statement.
However, the Fed warned of “significant downside risks to the economic outlook, including strains in global financial markets.”
The dollar strengthened on the news, with the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, gaining 0.3% to trade at a seven-month high of 78.66.
A stronger dollar saps demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Crude prices came under further pressure after a preliminary reading of the HSBC China purchasing managers’ index fell to a two-month low of 49.4 in September, remaining in contraction territory for the third consecutive month.
Data showing that German manufacturing output fell to a 24-month low in September, while manufacturing activity in the euro zone slumped to the lowest since August 2009 also weighed.
Energy traders pay close attention to manufacturing numbers, as they are used to gauge future oil demand growth.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery fell 1.03% to trade at USD107.95 a barrel, up USD24.93 a barrel on its U.S. counterpart.
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