PR: Oil prices rise after US dollar declines on FOMC minutes
Crude futures added more than US$1 today as the US dollar declined against other major currencies after the details of the latest Federal Open Market Committee Meeting were revealed.
The minutes of the FOMC meeting that took place on 21 September showed that most members showed inclination to implement more quantitative easing (QE) to support the economy.
The regulators cited the currently high unemployment rate of nearly 10% and low inflation as rationales for more stimulus.
Back in late September, JP Morgan (NYSE:JPM) put the chances of further QE in 2010 at 75%.
The US dollar fell on the back of the update with the EUR/USD rate once again rising close to 1.40 just two days after falling below 1.38. The American currency has recently hit 8 month lows against the euro and 15 year lows against the yen as speculation that the Fed will print more money and buy more government debt intensified.
A weaker US dollar makes dollar denominated commodities such as crude cheaper for holders of other currencies, lifting demand.
Movements in equity markets provided further support for crude. The FTSE 100 rallied 1.5% today, while futures for the Dow Jones Industrial Average in the US climbed 0.7%.
Oil futures usually track changes in share prices, which serve as an indicator of the strength of the economy and the outlook for energy demand.
Asset management company AllianceBernstein’s (NYSE:AB) research division Sanford Bernstein has slashed its forecasts for crude prices from US$103/barrel to US$90/barrel in 2011, while the 2012 estimate was cut by 8% to US$102/barrel.
The next meeting of the Organization of Petroleum Exporting Countries (OPEC) will kick off tomorrow with no changes to the current quotas expected.
November Brent Crude reached US$84.45/barrel, while US light, sweet crude for November delivery last traded at US$82.85/barrel on the New York Mercantile Exchange (NYMEX).
Earlier this week, OPEC cut its demand forecasts for its crude oil from 28.7 million barrels per day to 28.6 million barrels per day, citing the slowing recovery in the world and particularly the US.
Blue chip oil and gas producers were on the rise today. Supermajors BP (LON:BP) and Shell (LON:RDSB) climbed 2.2% and 1.7% respectively. Cairn Energy (LON:CNE) rose 1.8%, while BG Group (LON:BG) and Tullow Oil (LON:TLW) tacked on just over 1%.
Oil and gas engineering firms did very well with Amec (LON:AMEC) and Petrofac (LON:PFC) adding nearly 4%.
Heritage Oil (LON:HOIL) led the midcaps with a 2% advance. Dragon Oil (LON:DGO) and Premier Oil (LON:PMO) added 1.2% and 1% respectively.
JKX Oil & Gas (LON:JKX) and Salamander Energy (LON:SMDR) rose marginally.
Dana Petroleum (LON:DNX) made little headway.
Soco International (LON:SIA) slipped 5%.
European focussed oil and gas exploration and production company Ascent Resources (LON:AST) was among the top performers in the market with a 27% surge. Energy sector focused investor Xtract Energy (LON:XTR) followed, rallying 13.5%. Central and Eastern Europe focused producer and explorer Aurelian Oil & Gas (LON:AUL) advanced 7%.
