Oil prices drop as Fed worries about global economy

[NEW YORK] Oil prices sank on Friday after the US Federal Reserve expressed doubts about the strength of the global economy as it held off from an interest rate hike.

US benchmark West Texas Intermediate for delivery in October dropped US$2.22 to US$44.68 a barrel from Thursday's close.

Brent North Sea crude for November delivery lost US$1.61 to US$47.47 a barrel in London trade.

The Federal Reserve held its key interest rate locked near zero Thursday, citing worries about how the slowdown in China will hit the US economy.

"China is weighing on the demand side. Everything that is negative out of China is even more bearish than I am," said James Williams of WTRG Economics.

"We are still in an oversupplied market by at least 1.5 million barrels a day."

Oil prices had surged on Wednesday after the US Department of Energy revealed a 2.1 million barrel drop in inventories, fuelling hopes of a pick-up in demand in the world's biggest economy.

"In the case of oil, the expected fall of US output should in theory help to support prices, even if major upward moves seem unlikely for the foreseeable future," said Fawad Razaqzada, analyst at Gain Capital trading group.

AFP