MW: Oil gains ahead of Fed; Mideast tensions in focus
Protests spread to Yemen, adding some risk premium to markets
By Claudia Assis and Barbara Kollmeyer, MarketWatch
SAN FRANCISCO (MarketWatch) — Oil futures rose on Thursday as investors were rattled by developments in the Middle East and as hopes persisted that the Federal Reserve would unveil additional stimulus measures.
Crude for October delivery CLV2 +1.13% gained $1.16, or 1.2%, to $98.16 a barrel on the New York Mercantile Exchange.
Prices traded as high as $98.58 a barrel.
Energy traders kept an eye on developments in the Middle East after the U.S. ambassador to Libya was killed in Benghazi on Tuesday.
Protesters on Thursday stormed the grounds of the U.S. embassy in Yemen. No embassy personnel was injured in the attack. Read: Protesters attack U.S. embassy in Yemen .
“Although this doesn’t present an immediate threat to oil production, connecting the dots from civil unrest to geopolitical tension and potential escalating violence is adding a bit of a risk premium into prices,” wrote Matt Smith, an analyst with Summit Energy, in a note to clients.
The main focus of the oil market remains the Fed, he added.
Some investors expect the Fed to wrap up its two-day meeting on Thursday with an announcement that it will start another large-scale bond-buying program. Read more about the Fed's key policy meeting.
Natural-gas futures, meanwhile, added to losses after an inventories report. Natural gas for October delivery NGV12 -2.45% fell 7 cents, or 2.1%, to $2.99 per million British thermal units.
The Energy Information Administration reported an increase of 27 billion cubic feet for the week ended Sept. 7. Analysts polled by Platts expected an increase between 25 billion cubic feet and 29 bcf for the week.
The rise was smaller than the 80-bcf addition in the same week in 2011 and the five-year-average injection of 72 bcf.
The increase was bullish relative to the five-year average, but investors were looking ahead, said Tim Evans, an analyst with Citigroup’s Citi Futures Perspective.
“The issue for the market is whether the return of more production from the Gulf of Mexico and the seasonal cooling trend will result in more neutral data going forward. Without the threat of a follow-up bullish number, we’re seeing profit-taking off the recent rally,” he said.
Hurricane Isaac halted natural-gas and oil production when it passed through the Gulf of Mexico in late August. Natural-gas prices had gained for the past three sessions, including a jump of 2.4% on Wednesday.
In other trading, October gasoline futures RBV2 -1.32% declined 2 cents, or 0.8%, to $2.98 a gallon, while heating oil for the same month HOV2 +0.05% gained less than 1 cent, or 0.3%, to $3.22 a gallon.
Claudia Assis is a San Francisco-based reporter for MarketWatch.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Sarah Turner in Sydney contributed to this report.
