Oil steady near 2-month high on US monetary easing hopes

Oil steady near 2-month high on US monetary easing hopes

Singapore: Oil was steady on Monday after earlier touching a two-month high near $82 on expectations that the slow pace of the US economic recovery will prompt a monetary boost that would spur energy consumption.

November US crude was unchanged at $81.58 a barrel at 8:20am, after touching $81.87 earlier, the highest price since 6 August. ICE Brent gained 3 cents to $83.78.

US manufacturing growth slowed last month and inflation remained subdued in August, leaving the door open for the Federal Reserve to launch a fresh round of monetary policy easing.

How fast that happens will depend on economic indicators to be released before the Fed’s next policy meeting on 2-3 November.

Markets await durable goods orders for August on Monday and monthly non-farm payrolls on Friday.

“For the oil markets, putting a floor under inflation expectations and easing concerns about deflation is important and constructive-to-bullish for prices," said Mike Wittner, Societe Generale’s head of oil market research.

Attention “will be intensely focused on next Friday’s US labour report, and the price reaction could be volatile."

The dollar hit a six-month low versus the euro and global stocks edged higher on Friday after Federal Reserve officials said more must be done to lift the slow-growing US economy.

Oil becomes relatively cheaper for buyers outside the US when the the greenback weakens. But a stronger dollar against a basket of currencies, up 0.15% on Monday, capped oil’s gains.

US economic data on Friday showed both consumer and construction spending rose more than expected in August, but investment in private projects fell to its lowest level in more than 12 years.

The Houston Ship Channel, the main waterway through which crude flows into the Texas refining hub, may be closed for three days after a barge struck a highline electrical tower on Sunday, downing a power line stretching across the waterway to the busiest US petrochemical port, the US Coast Guard said.

The International Energy Agency said on Friday it anticipated upward pressure on oil prices in the second half of 2011 due to a projected decline in oil stocks.

The United States and Britain warned their citizens on Sunday of an increased risk of terrorist attacks in Europe, with Washington saying al Qaeda might target transport infrastructure.

Western intelligence sources said militants in hide-outs in northwest Pakistan had been plotting coordinated attacks on European cities, the plans apparently surviving setbacks from a September surge in drone strikes and an arrest.