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Brent over $111 on stimulus hopes as Irene weakens

Brent over $111 on stimulus hopes as Irene weakens
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First Published: Mon, Aug 29 2011. 05 30 PM IST
Updated: Mon, Aug 29 2011. 05 30 PM IST
London: Brent crude oil steadied around $111 on Monday as the dollar weakened and after a hurricane swept up the US east coast, with no reports so far of serious damage to refineries and terminals.
Global financial market were supported by hopes the US Federal Reserve might launch a third round of quantitative easing (QE3) after Fed Chairman Ben Bernanke left the door open for further action to stimulate the US economy.
World shares rose 0.98%, with European and Asian markets tracking Friday’s 1% rise on Wall Street following Bernanke’s keynote speech in Jackson Hole.
Brent crude was down 25 cents at $111.111 a barrel as of 4:27pm, after slipping as low as $110.53. US crude gained 70 cents to $86.07.
Fears of disruptions to US oil supplies from weather damage helped support oil at the end of last week, but tropical storm warnings for the U.S. east coast have been discontinued, the National Hurricane Center said.
“With the Fed and the hurricane headlines fading, investor concern should shift to more intractable issues, such as slowing global macro trends and European debt issues,” said Edward Meir, senior commodities analyst at brokers MF Global.
“We think energy markets will likely be mildly on the defensive over the next few days as some of the events that have lent a measure of support are now behind us,” he added.
Seven refineries with a total of 1.23 million barrels per day capacity -- 73% of the 1.7 million bpd total in the U.S. Northeast -- had been in the storm’s projected path.
Hurricane Irene, which was downgraded to a tropical storm on Sunday, has left at least 15 dead, as many as 3.6 million customers without electricity and thousands of downed trees.
Brent and US crude grades moved in opposite directions as traders punted on their price differential to widen further on differing fundamental outlooks, analysts said.
The Brent-WTI spread for October was at $25.10 a barrel. It hit a record of almost $27 earlier this month.
BRENT-WTI SPREAD
“It’s possible the spread could rise to $26-$28 in the short term. But the improvement of the situation in Libya is a bearish factor (for Brent), although it will take time for exports to return,” said Ken Hasegawa, a commodity derivatives manager at Newedge Brokerage in Tokyo.
Libya’s battered oil towns are struggling to get back to work after months of back-and-forth clashes between rebels and forces loyal to Moammar Gadhafi along the Mediterranean coast.
Rebel authorities have called on oil workers to return to their jobs to get the country’s economic lifeline flowing again.
“A resumption of output in Libya is a possibility and will weigh on the market from the supply side,” said MF Global analyst Tom Pawlicki in a report.
US crude, which is more sensitive to news from the world’s biggest economy, benefited from US Federal Reserve Chairman Ben Bernanke’s comments that suggested leaving the door open for further action to stimulate the world’s biggest economy. His remarks and the downgrade of Irene also helped Asian stocks open firmer on Monday.
The US central bank’s policy panel will meet for two days next month instead of one to mull its options to provide additional monetary stimulus, among other topics, Bernanke said on Friday.
But the chairman stopped short of announcing any new stimulus measures. The potential of stimulus measures weighed on the dollar.
Market participants will be watching a slew of economic data out of the US this week for further insight into the health of the world’s biggest economy. The key will be the non-farms payrolls report for August due out on Friday.
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First Published: Mon, Aug 29 2011. 05 30 PM IST
More Topics: Oil | Crude | Markets | Commodity | ICE Brent |