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Oil prices dip as Fed holds rate at zero
[NEW YORK] World oil prices dipped Thursday as traders weighed a Federal Reserve decision to keep its benchmark interest rate at zero, citing worries about global growth.
US benchmark West Texas Intermediate for October delivery slipped 25 cents to US$46.90 a barrel on the New York Mercantile Exchange.
European benchmark Brent oil for November delivery lost 67 cents at US$49.08 a barrel in London.
The Fed, following a two-day policy meeting, left its federal funds rate unchanged at zero-0.25 per cent, opting against the first increase in nine years. While the Fed expressed confidence in the US recovery, it cited concern about overseas conditions.
"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Fed said.
Matt Smith, analyst at ClipperData, said the Fed's decision to hold off a hike typically would be bullish for crude because it will push the dollar lower against other currencies. A weaker dollar encourages demand for oil because crude is priced in the US currency.
But Smith said the benefit to oil was countered by the Fed's rationale for not hiking rates.
"They raised their concern over the global economy, so they're obviously expressing concern on a broader basis than the market really envisions, so from that perspective, it is offsetting the impact of not raising rates."