Gasoline retreated as remarks that U.S. Federal Reserve Chairman Ben S. Bernanke made to Congress today raised doubts that the central bank would institute a third round of quantitative easing to boost the economy.
Futures reversed a gain as Bernanke told lawmakers that further rounds of stimulus could boost the economy, yet may have “diminishing returns.” He also said the economy is at risk from the Europe debt crisis and the prospect of fiscal tightening.
“He’s playing both sides of the fence and there’s a lack of confidence that the Fed will make the right moves to boost the economy and create jobs,” said Daniel Flynn, a trader and oil market analyst at Price Futures Group in Chicago.
Gasoline for July delivery fell 0.94 cent, or 0.4 percent, to $2.6809 a gallon at 11:39 a.m. on the New York Mercantile Exchange, heading for the first loss in four days.
“The situation in Europe poses significant risks to the U.S. financial system”, Bernanke said today in testimony to the Joint Economic Committee in Washington. “As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate.”
Bernanke also warned lawmakers that “a severe tightening of fiscal policy at the beginning of next year that is built into current law -- the so-called fiscal cliff -- would, if allowed to occur, pose a significant threat to the recovery.”
Bernanke on June 19-20 will lead the Federal Open Market Committee in a policy-setting meeting.
First-time claims for jobless benefits in the U.S. fell by 12,000 to 377,000 in the week ended June 2 from a revised 389,000 the prior week, the Labor Department said today. The four-week moving average of claims, a less-volatile measure, climbed to 377,750, the highest in a month, from 376,000.
Futures rose earlier after China cut benchmark lending and deposit rates for the first time since 2008. The People’s Bank of China said on its website that the benchmark one-year deposit rate will drop by 0.25 percentage point from tomorrow to 6.31 percent amid signs of slower economic growth.
“The market is reacting to the surprise interest rate cut in China overnight, which is boosting prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Regular gasoline at the pump, averaged nationwide, fell 0.5 cent to $3.56 a gallon yesterday, according to AAA. That’s the lowest price since Feb. 18.
July-delivery heating oil declined 0.51 cent to $2.6666 a gallon on the exchange.
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