FRX: Crude oil rallies after U.S. data, Draghi; Mideast tensions in focus
Forexpros - Crude oil futures were up sharply during U.S. morning hours on Thursday, adding to gains after European Central Bank President Mario Draghi reiterated that the central bank was ready to start purchasing the debt of troubled euro zone states earlier in the day.
Growing concerns over escalating tensions between Syria and Turkey further supported prices.
On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD89.31 a barrel during U.S. morning trade, jumping 1.35%.
Earlier in the day, prices rose by as much as 1.55% to hit a session high of USD89.53 a barrel. New York-traded crude prices tumbled to USD87.71 a barrel on Wednesday, the lowest since August 3.
Speaking at the ECB’s post-policy meeting press conference earlier in the day, Draghi said the central bank was ready to undertake Outright Monetary Transactions when the prerequisites are in place.
Draghi reiterated that the central bank was acting strictly within its mandate in undertaking a bond buying program via OMT’s.
The ECB left rates on hold at a record low 0.75% earlier, in a widely anticipated decision.
Market sentiment had been bolstered by hopes that Spain will soon request a bailout and trigger the ECB’s bond purchasing program, a move which investors hope would ease the debt crisis in the region.
Earlier Thursday, Spain saw borrowing costs fall at an auction of government debt, with the yield on five-year bonds dropping to 4.76% from 6.45% last month.
In the U.S., the Department of Labor said the number of people who filed for unemployment assistance in the U.S. last week rose to 367,000, compared to expectations for an increase of 7,000 to 370,000.
Also Thursday, the U.S. Census Bureau said factory orders tumbled by a seasonally adjusted 5.2% in August, compared to expectations for a 5.8% decline.
Oil traders now looked ahead to Friday’s key U.S. non-farm payrolls data, which will allow investors to gauge the strength of the labor market. The Federal Reserve said last month it will purchase USD40 billion of mortgage-backed securities every month until the labor market improves.
Minutes from that September Fed meeting will be released later in the day. Markets will be looking to see if any other policy measures were considered.
Meanwhile, oil prices found further support after Turkey’s parliament authorized the government to order military action in Syria earlier in the day. A mortar bomb fired across the border Wednesday killed five Turks.
Countries in the Middle East and North Africa were responsible for 36% of global oil production and held 52% of proved reserves in 2011.
Some bargain buying, combined with weakness in the U.S. dollar also lent support.
Oil futures plunged more than 4% on Wednesday, the largest one-day decline since mid-December of 2011, as fears over the outlook for global growth intensified following the release of weak economic data from China and Europe.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for November delivery gained 1.3% to trade at USD109.53 a barrel, with the spread between the Brent and crude contracts standing at USD20.22 a barrel.
