HONG KONG (MarketWatch) -- Oil futures dropped Thursday as the U.S. dollar jumped and oil investors booked profits from a previous rally after Fed's decision to taper its stimulus due to an improving economy.
January crude oil (CLF4) dropped 8 cents, or 0.1%, to $97.72 a barrel in electronic trading.
Prices rose 58 cents, or 0.6%, to settle at $97.80 a barrel on Wednesday, the highest close for a most-active contract since Dec. 10, according to Factset data.
The Federal Reserve said on Wednesday that it would taper its monthly purchases of assets from the current rate of $85 billion to $75 billion next month, which markets take as a sign that the economy is improving and energy demand will increase.
Bloomberg The Royal Dutch Shell Plc Olympus tension leg platform is seen at dawn in Ingleside, Texas, U.S. Oil futures traded lower on Thursday as oil traders booked profits after the Wednesday rally and the U.S. dollar got stronger, said ICICI Bank analysts in a note on Thursday.
The dollar jumped above 104 yen Wednesday, its highest level in 2013, after the Fed announced its tapering move. The Fed's asset purchases have been seen as weakening the greenback.
However, "the losses remained capped amidst a decline in U.S. crude stockpiles by 2.94 million barrels," said the ICICI Bank analysts.
The U.S. Energy Information Administration, an agency of the U.S. Department of Energy (DOE), reported on Wednesday a drop of 2.9 million barrels in crude supplies for the week ended Dec. 13.
"Oil markets were firm in the wake of the weekly DOE update and the Fed's meager gesture to the so-called taper," wrote Stephen Schork, editor of the Schork Report on Thursday.
In other trading, Brent crude for February delivery (UK:LCOG4) fell 25 cents, or 0.2%, to $109.38 a barrel.
Meanwhile, January natural gas (NGF14) rose 6 cents, or 1.5%, to $4.31 per million British thermal units. January gasoline (RBF4) stayed flat at $2.70 a gallon and January heating oil (HOF4) was at $3.01 a gallon likewise.
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