October 14, 2010 Oil Rises After Dollar Drops on Speculation Fed Will Ease Monetary Policy
Oil advanced in New York after the dollar declined against the euro as initial jobless claims rose, adding to speculation U.S. efforts to ease monetary policy will erode the value of the currency.
Futures retraced some of yesterday’s drop as the U.S. currency fell versus most of its major counterparts on bets the Federal Reserve will increase purchases of government debt in a policy known as quantitative easing. Fed Chairman Ben S. Bernanke will speak today on monetary policy objectives and tools in Boston.
“The Federal Reserve is trying to flush the system with excess capital trying to get the economy up and running,” Mike Sander of Sander Capital Advisors in Seattle, said in an e- mailed note today. “It’s clear the U.S. economy is still barely holding on. I see the price of oil staying between the range of $85 and $75 for the near future.”
The November contract gained as much as 28 cents, or 0.3 percent, to $82.97 a barrel in electronic trading on the New York Mercantile Exchange, and was at $82.91 at 9:33 a.m. Sydney time. Yesterday it lost 32 cents to $82.69. Prices are up 0.3 percent for the week and 4.5 percent this year.
Bernanke said on Oct. 4 that the central bank’s first round of large-scale asset purchases aided the economy and that further quantitative easing is likely to help more.
The dollar traded little changed at $1.4075 a euro after sliding 0.9 percent yesterday, when it touched $1.4122, the weakest level since Jan. 26. A weaker U.S. currency increases the appeal of commodities as an alternative investment.
Petroleum Demand
Oil slipped yesterday after a government report showed U.S. petroleum demand dropped to the lowest level in more than 10 months. The Energy Department said fuel consumption fell 0.7 percent to 18.3 million barrels a day last week, the lowest level since November. U.S. jobless claims unexpectedly rose to 462,000 in the week to Oct. 9, a Labor Department report showed.
U.S. gasoline stockpiles decreased 1.77 million barrels to 218.2 million last week, the Energy Department said. They were forecast to slip 1.5 million barrels, according to the median of 19 analyst estimates in a Bloomberg survey before the report.
Crude inventories dropped 416,000 barrels to 360.5 million, the report showed. Supplies were estimated to jump 1.45 million barrels, the Bloomberg News survey shows.
Brent crude for November settlement fell 11 cents, or 0.1 percent to $84.53 a barrel on the ICE Futures Europe exchange in London yesterday.
OPEC Meeting
Representatives from Venezuela and Libya at a meeting of the Organization of Petroleum Exporting Countries in Vienna said oil at $100 a barrel would compensate producers for a slide in the dollar without derailing the global economic recovery.
Crude at $90 to $100 won’t “harm” growth, Venezuelan Energy and Oil Minister Rafael Ramirez said. Shokri Ghanem, chairman of Libya’s National Oil Corp., also called for higher prices even as other nations said they were content with levels of $70 to $85 a barrel.
OPEC, which accounts for about 40 percent of global crude supply, agreed to leave oil-production quotas unchanged and called on members to improve compliance with the group’s self- imposed production limits.
http://www.bloomberg.com/news/2010-10-14/oil-rises-after-dollar-drops-on-speculation-fed-will-ease-monetary-policy.html
