MW:Oil futures climb on Mideast tension, Fed stimulus
By Sarah Turner and Sara Sjolin, MarketWatch
LONDON (MarketWatch)—Oil futures rose in European trading hours Friday, extending gains after the U.S. Federal Reserve announced fresh quantitative easing to support the U.S. economy, while concerns over unrest in the Middle East stirred supply fears.
Crude for October delivery CLV2 +1.96% CLV2 +1.96% rose $1.36, or 1.4%, to $99.69 a barrel in electronic trading on the New York Mercantile Exchange.
Oil futures gained 1.3% in New York Thursday to settle at their highest level in four months after the Fed said that it would buy $40 billion a month of mortgage-backed securities for an unlimited period.
On Friday, oil prices were further lifted by worries that this week’s violence in the Middle East and North Africa could lead to supply disruptions. The unrest in the region broke out after the U.S. ambassador to Libya was killed in Benghazi on Tuesday, and violence continued Thursday after protesters stormed the grounds of the U.S. embassy in Yemen. No embassy personnel was injured in the attack. Read more on Yemen attack.
“This region, which is so crucial to the supply of oil, is thus far from stable, something that is likely to give rise to a lasting risk premium,” analysts at Commerzbank said.
They also highlighted the stimulus announcement from the Fed as a major driver for oil prices’ multimonth high.
The Federal Reserve extended its program of buying long-dated and selling short-dated securities and said that it would keep interest rates at ultralow levels until the middle of 2015. Read more on the Fed.
The announcement from the Federal Reserve weighed on the U.S. dollar. Dollar-denominated commodities such as crude oil tend to move inversely with the U.S. currency. Read more on U.S. dollar moves.
The ICE dollar index DXY -0.47% fell to 79.102 from 79.254 in late U.S. trading on Thursday.
Citigroup energy analysts said that reaction to the Fed moves and other macro events, as well as geopolitical risks, may well continue to drive oil-market trading in the short term.
Further out, however, they commented that money managers appear to be “positioned to benefit from bullish news and are vulnerable to bearish news, such a fourth-quarter supply/demand surplus.”
In other Friday moves in the energy complex, October gasoline futures RBV2 +2.13% rose 5 cents to $3.02 a gallon, while heating oil for the same month HOV2 +1.31% traded up 4 cent at $3.25 a gallon.
Natural gas for October delivery NGV12 +0.46% edged up 1 cent to $3.05 per million British thermal units.
Sarah Turner is MarketWatch's bureau chief in Sydney.
Sara Sjolin is a MarketWatch reporter, based in London.
