Oil prices fell below $81 a barrel on Tuesday in Asia as investors looked to a Federal Reserve meeting for possible policy changes to boost US economic growth.
Benchmark crude for September delivery was down 56 cents at $80.92 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose 78 cents to settle at $81.48 on Monday.
Oil jumped out of the $70s to a three-month high last week and has held above $80 despite a weak US July employment report released on Friday. Traders are speculating the Fed may announce later Tuesday new stimulus measures to keep the economy from slipping back into recession.
"At this stage, we cannot imagine any set of numbers that this market will not interpret bullishly," Cameron Hanover said in a report. "Bullish numbers are bullish and bearish numbers will force the Fed to do something bullish."
Traders have shrugged off rising US crude inventories as low interest rates encourage higher-risk investments. Based only on supply and demand, oil should be trading between $20 and $30, Cameron Hanover said.
"The best-heeled and biggest players can borrow money without any cost," Cameron Hanover said. "They have been borrowing that money and plowing it into commodities."
In other Nymex trading in September contracts, heating oil fell 0.88 cent to $2.1450 a gallon, gasoline dropped 0.92 cent to $2.1095 a gallon and natural gas slid 1 cent to $4.299 per 1,000 cubic feet. Brent crude was down 53 cents at $80.46 a barrel on the ICE futures exchange.