Oil drops as Fed signals rate cuts may be limited

By Aaron Sheldrick
TOKYO, Aug 1 (Reuters) - Oil prices fell more than $1 on
Thursday, declining for the first time in six days, after the
U.S. Federal Reserve dampened hopes for a string of rate cuts
and Sino-U.S. trade talks ended without progress.
The drop came despite a bigger-than-expected decline in
inventories in the U.S. and a drop in crude production among
OPEC members, along with Libya cutting exports, typically
bullish drivers for the market.
Brent crude, LCOc1 the international benchmark, fell
$1.06, or 1.6%, to $63.99 a barrel by 0037 GMT, while U.S. crude
was down 93 cents, or 1.6%, at $57.65 a barrel, having fallen
more than $1 earlier.
The Federal Reserve cut interest rates on Wednesday, but
against expectations the head of the U.S. central bank said the
move might not be the start of a lengthy series of cuts to shore
up the economy against risks including global economic weakness.
"Although the remarkably bullish U.S. inventory reports
(are) providing a very encouraging backdrop for oil markets, oil
prices sagged, as whatever forward-looking monetary policy
support from the Fed has pretty much evaporated," Stephen Innes,
managing partner, VM Markets Pte said in a note.
Meanwhile, negotiators from the United States and China, the
world's two biggest economies, wrapped up a round of trade talks
on Wednesday without visible signs of progress and put off their
next meeting until September. Meanwhile, U.S. crude oil stockpiles fell for the seventh
straight week, declining to their lowest levels since November
even as production rebounded and net imports increased, the
Energy Information Administration said on Wednesday.
Crude inventories USOILC=ECI fell 8.5 million barrels in
the week ended July 26, far exceeding analysts' expectations for
a decrease of 2.6 million barrels. EIA/S
Oil output among members of the Organization of the
Petroleum Exporting Countries (OPEC) hit an eight-year low in
July as a further voluntary cut by top exporter Saudi Arabia
deepened losses caused by U.S. sanctions on Iran and outages
elsewhere in the group, a Reuters survey found. Libya's state-owned National Oil Corp declared force majeure
on loadings of crude from the country's largest oil field on
Wednesday. A Reuters monthly poll showed oil prices are expected to be
range-bound near current levels this year as slowing economic
growth and the protracted trade dispute between the U.S. and
China curb demand.