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Oil prices extend losses as Fed spurs rate hike talk
[NEW YORK] Oil prices slid for a second straight day on Thursday as traders worried about abundant supplies and a dollar made stronger by Federal Reserve hints of a hike in interest rates.
Brent North Sea crude for December, the global benchmark for oil, dropped to US$47.98 a barrel in London, down 60 cents from Wednesday's settlement.
US benchmark West Texas Intermediate for delivery in December slid US$1.12 to US$45.20 a barrel on the New York Mercantile Exchange.
A stronger US currency tends to weigh on demand for dollar-priced crude oil, and the dollar continued to strengthen after Fed Chair Janet Yellen's hawkish remarks Wednesday saying a hike in December would be a "live possibility" if the economy continues to strengthen.
"The big elephant in the room was Yellen with a December rate hike back on the table," said Phil Flynn, energy analyst at Price Futures Group. "I don't think the market believed it until Yellen said it." The higher likelihood of a rate hike "slowed the momentum" in the market, he said.
"We have seen few signs recently indicating a change of tack in the oil markets," said Natixis analyst Abhishek Deshpande, in reference to recent sharp losses.
"Global production continues to remain in excess of demand and Opec have been continuing with their policy of maintaining output levels to protect market share.
"Based on our analysis, we maintain our view that oil prices will remain under pressure as long as the surplus remains in the market."