Oil fell to below $82 on Friday as investors, anxious about the form and scale of an expected monetary easing by the U.S. Federal Reserve next week, took profits at the end of a month of commodity price gains.
U.S. crude for December fell 45 cents to $81.73 a barrel at 2:51 a.m. ET, little changed from its close last Friday. ICE Brent fell 34 cents to $83.25.
“Investors who have made good profits in October are reducing their long positions, because if the Fed stimulus is less than market expectations, the dollar will come back up and commodities will sell off,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
Prices in October traded mostly between $80 and $85, up from between $72 and $80 in September, as expectations grew that the Fed would embark on a fresh round of bond purchases known as quantitative easing to inject funds into a flagging economy.
“We think that oil prices have formed a firm base above the $80 mark with the likelihood of a sharp correction below $80 easing for the remainder of this year,” said Stefan Graber, a commodities analyst with Credit Suisse in Singapore.
The last major economic cue for markets before the Fed outlines steps to boost recovery in a meeting November 2-3 will be U.S. third-quarter GDP data due later on Friday.
Top oil consumer the United States is expected to show a 2 percent increase in third-quarter GDP growth, up from 1.7 percent in the second, due to higher consumer spending, a Reuters poll showed.
New claims for U.S. unemployment benefits unexpectedly fell to a three-month low last week, but the underlying trend still points to labor market stagnation.
“People are very worried about a slowdown in economic growth,” Emori said. “Industrial production in some countries is quite weak.”
The economic performance of Japan, the world’s third-largest oil user, is falling short of market expectations.
Japanese factory output fell for the fourth straight month in September, the longest streak of declines in more than a year, adding to signs the economy is losing momentum as slowing export growth and a strong yen bite.
Core consumer prices also marked their 19th straight month of annual declines in September and household spending fell from August, underscoring how sluggish consumption was keeping Japan mired in grinding deflation.
And in South Korea, industrial output in September shrank for a second consecutive month, data showed on Friday, missing market expectations and adding to concerns about the slowing global demand.
The U.S. dollar .DXY found a steadier footing against major currencies on Friday, a day after posting its biggest fall in over a week as a fickle market turned its attention to looming U.S. growth data.
The inverse correlation between the dollar and the price of crude has weakened over the past two days after reaching its strongest levels in 14 months earlier this week.
Asian stocks slipped on Friday, led by Japan, on signs of sluggish consumer electronics demand, while the bruised dollar steadied, with dealers focused on how upcoming economic data would impact views on a Fed meeting next week.
The world’s biggest oil companies, Exxon Mobil (XOM.N) and Royal Dutch Shell (RDSa.L), reported sharply higher third-quarter profits on Thursday, beating analysts’ forecasts, as rising energy demand drove up oil and gas prices and fattened refinery margins.