WTI oil price at $81, all eyes on US Fed Reserve meeting

WTI oil prices are trading lower in Tuesday’s session, near $81 as all eyes focus on the US Federal Reserve meeting which may result in the US increasing money supply, hence more US dollars.

US Light crude oil futures for September 2010 delivery were trading at $80.87, 08.00 GMT on the NYMEX.

Is a US Dollar Slide Coming Soon?

“From a relative basis, the US looks like it may increase the money supply while other central banks do not. This should weaken the US dollar,” said HSBC in a note.

The US dollar is still considered weak compared to the euro and the yen and since the middle of July the dollar has come under selling pressure from growing expectations for the Fed to take further steps to counter the dampened US recovery outlook by increasing US money supply.

Downgrade for the US Economy?

The FX market is apparently expecting a Fed statement that mildly downgrades the health of the US economy, according to analysts.

Analysts have been debating steps that could be taken at today’s meeting of the Federal Open Market Committee (FOMC) of the Federal Reserve, with some saying it may step up “quantitative easing” – pumping money into the economy through the purchase of assets.

All markets are eyeing the Fed meeting later today and results will heavily influence WTI, Brent oil futures, commodities and stock markets around the world.