Singapore: Oil rose on Thursday to within a dollar of 5-month peaks, supported by expectations that central banks will ease monetary policy to shore up sluggish economies and falling US fuel stockpiles.
November US crude rose 19 cents to $83.42 a barrel at 08.26 am. ICE Brent added 20 cents to $85.26.
The prospect of a second round of expansionary monetary policy, known nowadays as quantitative easing stage two, or QE2, hangs upon key US employment reports, with weekly statistics due on Thursday and more comprehensive monthly data on Friday.
“Whatever the data is, the market may continue to go to the upper side until early November,” said Ken Hasegawa, a commodity derivatives manager at Japan’s Newedge brokerage, referring to the Fed’s next policy-setting meeting on 2 and 3 November.
“It’s not easy to develop a short position at the moment because the trend is higher.”
A negative jobs reading on Friday could reassure investors the US Federal Reserve will take action to re-invigorate the economic recovery, Hasegawa said.
Private employers in the US cut 39,000 jobs in September, the largest monthly loss since January, ADP employment data showed on Wednesday, compared with forecasts for a rise of 24,000 jobs. The ADP private report is sometimes seen as a preliminary indication for the monthly government figures.
A sinking greenback on Wednesday, linked to the expected inflow of fresh dollars into the US economy, helped send front-month US crude to an intra-day peak of $84.09 a barrel, the highest price since 4 May.
“The US dollar has continued falling and this kind of trend will be extended forward,” Hasegawa said, increasing the relative purchasing power of dollar-denominated oil for holders of other currencies.
Adding to the effect of the weaker dollar, US gasoline inventories fell more than 13 times as much as expected last week, government statistics from the Energy Information Administration showed on Wednesday, down 2.65 million barrels in the week to 1 October. Distillate fuel supplies, including heating oil and diesel, declined 1.12 million barrels.
But US crude inventories rose by a larger-than-expected 3.09 million barrels as the nation’s refineries cut utilisation rates, the EIA said.
Stocks at the Cushing, Oklahoma, pricing hub for benchmark West Texas Intermediate (WTI) crude rose for the first time in nearly two months and were up almost 7,50,000 barrels last week at more than 35 million.
The prospect of a broader strike hitting France’s refining operations was also supportive for product prices. Workers at the country’s refineries may join a walkout at a key oil port on Thursday.
The dollar was mired near a 15-year low versus the Japanese yen and an 8-month low against the euro on Thursday on the spectre of more money-printing by the US Federal Reserve as early as next month.
Global bond prices rallied on Wednesday and pushed the dollar to an 8-1/2-month low against major currencies.
Japan’s Nikkei average fell 0.3% on Thursday, weighed down by the strength of the yen.
The northern part of the Houston Ship Channel reopened to inbound and outbound ships Wednesday for the first time in three days after workers cleared dangling power lines and an electrical tower leaning over the waterway, the US Coast Guard said.