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Oil Prices Slide on Powell Remarks, Breaking 5-Day Rally

Investing.com - Oil prices broke a five-day rally on Thursday as the Federal Reserve's first interest rate cut in a decade disappointed speculation on more aggressive action, pushing the dollar higher.

New York-traded West Texas Intermediate crude futures slide 78 cents, or 1.3%, to $57.80 a barrel by 7:26 AM ET (11:26 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., lost 64 cents, or 1.0%, to $64.41.

Even though the U.S. central bank cut rates by a quarter-point as expected, Fed Chairman Jerome Powell dampened expectations for future policy easing, saying the move was an "adjustment" and “not the beginning of a long series of cuts.”

Markets readjusted, taking a third rate cut this year off the table, which in turn drove the U.S. dollar higher to the detriment of oil and other commodities which are priced in the currency.

Oil’s recent rally had been strongly supported by expectations that the Fed would take more aggressive action to stave off the risks of a global economic slowdown.

The slowdown has raised concerns that demand for oil will decline given economic weakness worldwide.

Strategists at brokerage firm Orbex commented that they were still convinced that ongoing tensions with Iran in the Strait of Hormuz would prevail over a stronger U.S. dollar.

Their technical analysts said that if WTI oil can hold above $57.50, they expect to see “gradual gains” up to the $60 handle.

In other energy trading, gasoline futures fell 1.3% to $1.8385 a gallon by 7:28 AM ET (11:28 GMT), while heating oil declined 1.2% to $1.9478 a gallon.

Lastly, natural gas futures traded up 0.9% to $2.252 per million British thermal unit.

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