FX:Crude rallies 1% on ECB, Fed stimulus hopes; U.S. supply report eyed
Forexpros - Crude oil futures posted string gains during European morning trade on Wednesday, as market sentiment was boosted ahead of a policy-setting meeting by the European Central Bank.
Industry data showing a larger-than-expected decline in U.S. oil supplies last week provided further support.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD85.30 a barrel during European morning trade, jumping 1.2%.
It earlier rose by as much as 1.25% to trade at USD85.34 a barrel, the highest since June 1. Prices touched USD81.21 on June 4, the lowest since October 6, 2011.
Investors hung on to hopes for action by global central banks and other authorities to stimulate growth and boost the world economy.
Finance ministers from the Group of Seven industrialized nations held a teleconference call on Tuesday to discuss the euro zone's escalating debt crisis, however no major agreements or plans were formed.
Markets now shift their attention to the European Central Bank’s monetary policy meetings later in the day.
Although the market consensus is that it will hold its key interest rate unchanged at 1%, there is some speculation by market players that the ECB could announce liquidity injections in to Europe's troubled financial system.
Others expect the central bank to renew its suspended government bond-buying program to help ease pressure on Spain’s rising borrowing costs.
In addition, Federal Reserve Chairman Ben Bernanke will testify on Thursday before a congressional committee about the state of the U.S. economy. Gold traders will be looking for clues as to the likelihood of a fresh round of monetary easing, which could potentially hurt the U.S. dollar and support gold.
The Wall Street Journal, citing interviews and Fed speeches, reported late Tuesday that the U.S. central bank is mulling new measures to stimulate growth in the world’s largest economy.
Charles Evans, president of the Chicago Federal Reserve Bank called earlier for aggressive policy easing in the U.S., citing the recent run of "soft" economic data.
Meanwhile, oil traders were looking ahead to the U.S. Energy Information Administration’s closely-watched weekly report on U.S. stockpiles of crude and refined products later in the day.
The report was expected to show that U.S. crude oil stockpiles fell by 0.9 million barrels last week, the first decline 10 weeks.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories dropped by 1.8 million barrels last week, compared to expectations for a more modest decline of 0.9 million barrels.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery was up 1.05% to trade at 99.89 a barrel, with the spread between the Brent and crude contracts standing at USD14.59.
On Monday, prices fell to USD95.65 a barrel, the lowest since January 26, 2011.
London-traded Brent is down nearly 21% since hitting an intraday high of USD128.38 on March 1.
A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.
But revived talks between Iran and major powers over Tehran's nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.
