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What the Fed Taper Means for Oil Prices

by Dr. Kent Moors | published December 19th, 2013

Yesterday afternoon, after much gnashing of teeth, the Fed finally revealed its long awaited taper plans…

And the DOW jumped by almost 300 points.

Now, the taper itself is small to start – just a $10 billion reduction for the month of January. But the announcement was coupled with a pledge to keep the fed funds rate at zero beyond the 6.5% unemployment threshold.

As a result, two things collided in the last 90 minutes of yesterday’s trade: A clear indication that the economic recovery was strengthening and a classic “short squeeze,” which merely added fuel to the fire. 

As we approach the end of the year, that means the “Santa Claus rally” may have a bit longer to run

But longer-term, the market is now faced with less artificial stimulus next year and a gradual return to a market where direct pressures influence its direction.

Here’s what that will mean for the oil prices in 2014…