Oil rises on anticipation Fed may signal stimulus
NEW YORK |
NEW YORK (Reuters) – Oil rose on Tuesday on speculation the U.S. Federal Reserve could embark on fresh stimulus measures for the economy, and on continued violence in Libya and planned disruptions to Nigeria’s oil exports.
U.S. crude for October delivery rose by 91 cents to $85.33 a barrel and European benchmark Brent traded up 80 cents at $109.20 by 1:52 p.m. in New York.
Rising U.S. equities markets helped lift crude prices. The SP 500 index gained 2.4 percent ahead of a widely anticipated speech by Fed Chairman Ben Bernanke at a central bankers’ meeting Friday in Jackson Hole, Wyoming.
Some investors expect Bernanke to signal more Fed quantitative easing measures ahead to stimulate a sluggish U.S. economy.
“This is a rally driven on hopes of Bernanke saying something about more stimulus,” said Bill O’Grady of Confluence Investment Management in St. Louis.
“In Libya, rebels are in an urban warfare situation and Gaddafi hasn’t fallen, increasing the risk of oil disruptions and a lengthy period before production can resume.”
In top African oil producer Nigeria, Royal Dutch Shell declared a force majeure on Tuesday for exports of Bonny Light crude through October, following a hacksaw attack on a pipeline.
Trade sources said the entire Bonny Light program of around 200,000 barrels per day in exports has been withdrawn.
Crude rose starting early on Tuesday, following manufacturing data from China and Germany that was less gloomy than some economists had expected.
The data helped to boost the euro against the U.S. dollar, which slid 0.2 percent against a basket of foreign currencies. A weaker dollar can boost oil prices by making crude cheaper for foreign currency holders.
Weaker U.S. home sales data in July did nothing to curb a stock market rally, as some investors read the data as justification for more Fed stimulus.
Rebels gained control over large portions of Libyan capital Tripoli, but some forces remaining loyal to the Muammar Gaddafi regime fought back in street battles.
Rebels said they had gained control of a key Libyan oil export terminal, Ras Lanuf, and found it in tact with no damages. But analysts have said they do not expect Libyan crude exports to rebound any time soon following months of disruptions and civil war.
“Oil wells are not like faucets you can just turn back on. Libyan exports will take a long time to recover,” said O’Grady.
Brent’s premium to U.S. crude fell below $23 a barrel earlier on Tuesday, before expanding again to around $23.70 a barrel.
The spread has narrowed after reaching a record high $26.69 on Friday.
(Additional reporting by Robert Gibbons, Gene Ramos and Janet McGurty in New York and Simon Falush in London; Editing by Andrea Evans and David Gregorio)
Article source: http://feeds.reuters.com/~r/reuters/INbusinessNews/~3/T-Bj4Hy1lmk/idINIndia-58901020110823
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