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Oil slides ahead of expected ECB rate cut

05 July 2012, 09:53

 Singapore - Crude prices fell in Asian trade on Thursday amid caution ahead of a possible rate cut by the European Central Bank (ECB) when it meets later in the day, analysts said.

New York's main contract, light sweet crude for delivery in August shed 83 cents to $86.83 a barrel while Brent North Sea crude for August delivery slipped 32 cents to $99.45.

Crude traders were hoping for additional stimulus measures besides a widely expected slashing of the ECB's key interest rate, which currently stands at an all-time low of 1.0%, Phillip Futures said in a report.

"Attention in the markets today will focus on Thursday's ECB meeting with expectations of a rate cut," the report stated.

"The ECB has pumped more than €1 trillion into the banking system and there are hopes it could announce more cheap long-term loans or other non-conventional measures such as a resumption of its bond purchasing scheme."

Ahead of the meeting, analysts have predicted that the ECB - which has held interest rates in the 17 countries that share the debt-wracked euro currency at 1.0% since December - will cut its rate to 0.75%.

But with the rate cut now factored in, some have argued that there could be disappointment without additional measures from the bank, such as the resumption of its bond-buying programme which has lain dormant for 16 weeks.

Dark clouds were also on the horizon due to forecasts of a grim US jobs situation when its non-farm payrolls report is issued on Friday, Phillip Futures warned.

"Market expectations are for an anaemic rise of around 90 000 new jobs leaving the unemployment rate unchanged at 8.2% and creating the weakest quarter for jobs growth since the middle of 2010," its report stated.


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