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Fed Rate Hike Bad Timing for Crude Oil
Oilprice.com ^ | 16-12-2015 | Janet Yellen

Posted on 12/16/2015 12:16:04 PM PST by bananaman22

The Federal Reserve is about to raise interest rates for the first time in almost ten years and it couldn’t come at a worse time for the oil and gas industry.

On the one hand, the oil boom was fueled by loose money from the Fed. With near-zero interest rates, money flowed into capital-intensive shale oil and gas drilling for many years. That succeeded in creating a production boom. But the boom was too successful – the glut caused prices to crash. In this sense, the Fed helped inflate the drilling bubble, which burst in 2014.

Now the Fed is trying the difficult task of trying to withdraw its heavy hand from the global economy. But it will do so gradually and slowly. That will lead to a just a tiny increase in short-term interest rates, likely by 0.25 percentage points. Few expect long-term interest rates to rise to levels seen before the 2008 financial crisis anytime soon. As such, rates could remain low for decades.

But a rate hike will still add one more bearish element to oil markets already replete with negative forces. First, higher interest rates will raise the cost of money. That will make borrowing more expensive, particularly for high-yield firms that are seen as particularly risky right now. If that means more drillers lose their access to finance, or are unable to tap finance at reasonable rates, more companies could go bankrupt.

(Excerpt) Read more at oilprice.com ...


TOPICS: Business/Economy; Politics
KEYWORDS: fed; interestrate; oil; oilprices

1 posted on 12/16/2015 12:16:04 PM PST by bananaman22
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To: bananaman22

Yellen is the new word for Liar.


2 posted on 12/16/2015 12:24:26 PM PST by rockinqsranch ((Dems, Libs, Socialists, call 'em what you will. They ALL have fairies livin' in their trees.))
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To: bananaman22

The US Dollar will go through the roof.

It has to.

Oil down

Gold down

US exporters down

It’s called deflation and there’s nothing that can stop it.

Virtually all commodities down.

Long US Dollars and horde as much CASH as you can !!

Not cash in a bank.

Hard cash.


3 posted on 12/16/2015 12:29:19 PM PST by Zeneta (Thoughts in time and out of season.)
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To: rockinqsranch

Why exactly is that?


4 posted on 12/16/2015 12:40:53 PM PST by nickcarraway
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To: bananaman22

Raising the interest rate from a quarter to a half percent isn’t going to make that much of a dent in borrowing. It’s still dirt cheap to borrow.


5 posted on 12/16/2015 1:04:08 PM PST by Blood of Tyrants (There's a right to gay marriage in the Constitution but there is no right of an unborn baby to life.)
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To: bananaman22

Obama’s plan to destroy non OPEC oil is coming together


6 posted on 12/16/2015 1:08:47 PM PST by butlerweave
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To: bananaman22

It is only a quarter of a point.

It doesn’t help the oil price, but it is dwarfed by the effects of soft demand (e.g. China’s contraction), oversupply (shale, Iraq, Iran) and the super-glut in storage (80 year high utilization rate).


7 posted on 12/16/2015 1:44:20 PM PST by BeauBo
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