The price of oil dropped further below $105 a barrel Wednesday as traders awaited information on when the U.S. Federal Reserve will start to reduce its monetary stimulus.
By early afternoon in Europe, benchmark U.S. oil for October delivery was down 62 cents to $104.49 a barrel in electronic trading on the New York Mercantile Exchange. Wednesday's fall comes a day after the contract for September delivery dived $2.14, the sharpest decline in two months, to $104.96 a barrel. Analysts said some of the decline was driven by the expiration of the September contract at the end of trading. The October contract also fell $1.75 to $105.11 a barrel.
The key focus of attention later across all financial markets will be the release of the minutes to the Fed's last policy meeting. Traders will be looking out for any hints about when the central bank might begin cutting back on its $85 billion a month of asset purchases. Growing evidence that the U.S. economy is improving and a raft of comments from Fed officials have convinced many in the markets that the so-called tapering of the stimulus will start this year, possibly as soon as September.
The Fed's stimulus policy has lowered interest rates and made oil and other commodities a more attractive investment by offering potentially higher returns. Many analysts think the tapering could weigh on oil prices.
However, the crisis in Egypt has prevented prices from falling too much. Egypt controls the Suez Canal, which is a key transport route for oil and other goods in the Middle East. While analysts expect the channel to remain open, a risk premium and higher insurance costs are seen being added to the oil price.
Reports of labor conflicts at key Libyan ports used to export oil also supported prices despite unease over the Fed minutes.
"More so than Egypt, the oil markets will twist and turn on the developments in Libya," according to the Kilduff Report, edited by Michael Fitzpatrick. "The port workers strike is still more about economics than ideology, which is why violence there has been limited."
Traders are also awaiting confirmation of last week's decline of 1.2 million barrels of U.S. crude stockpiles reported late Tuesday by the American Petroleum Institute.
The report from the Energy Department's Energy Information Administration — the market benchmark — will be out later Wednesday. A survey of analysts by Platts, the energy information arm of McGraw-Hill Cos., forecast a draw of 1 million barrels of crude.
Brent crude, which is used to set prices for imported oil used by many U.S. refineries, was down 34 cents to $109.81 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Heating oil fell 0.93 cent to $3.0759 per gallon.
— Wholesale gasoline added 0.24 cent to $2.8208 a gallon.
— Natural gas rose 3 cents to $3.474 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.