Brent crude oil dropped below $102 on Thursday morning after the dollar hit new three year highs on Wednesday following the release of the Federal Reserve's meeting minutes and Chairman Ben Bernanke's testimony to congress. The commodity traded at $101.61 at 7:39 GMT on Thursday morning after Chinese data continued to drag prices down.
Bernanke told Congress that the Fed was going ease off its bond buying purchases in the next few meetings if US economic improvement continued. Following his testimony, the central bank's meeting minutes revealed a debate over how soon to begin cutting back the stimulus. The news led to speculation among investors that the Fed could start to scale back its $85 billion stimulus plan this year.
Over the past four years, the Fed's quantitative easing has flooded the markets with billions of dollars, which lent strength to most commodities, including Brent. Worries that the bank will cut back sent the dollar soaring and caused a massive drop in Brent prices, but many analysts believe the dollar's rise could be overdone.
Also weighing on Brent prices was Chinese preliminary purchasing managers' index data which showed the nation's factory activity shrank in May. According to Reuters, Chinese PMI fell to 49.6 in May, a seven month low. Figures also indicated that new orders dropped to their lowest level in 8 months, which many are attributing to shrinking local demand as well as the current global economy.
Chinese PMI coupled with the strong dollar could bring Brent down even further, many analysts are predicting. Some are expecting to see Brent trading near the $100 mark in the near term.
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