WSJ: Oil Inches Higher Ahead of Key Fed Meeting, German Ruling
By John M. Biers
NEW YORK--Oil prices edged higher Tuesday morning as traders await direction from some key macroeconomic news events expected later this week.
Light sweet crude for October delivery on the New York Mercantile Exchange was trading at 42 cents, or 0.4%, higher to $96.96. Brent oil futures were down four cents to $114.77.
"The markets are just treading water until they get a little more certainty," said Andy Lebow, senior vice president for energy futures at Jefferies Bache.
Analysts expect a quiet day of oil trading today as the market awaits action from the U.S. Federal Reserve later this week. Last month, U.S. Federal Reserve Chairman Ben Bernanke hinted that the Federal Reserve could undertake a third round of quantitative easing. Such a move could boost oil by stimulating the economy and eroding the value of the U.S. dollar, thereby making crude cheaper for countries that trade other currencies.
Also closely eyed this week: a ruling by Germany's Federal Constitutional Court on whether the euro zone's permanent bailout fund aimed at stemming the sovereign debt crisis and the fiscal pact on states' budget limits are in keeping with the German constitution.
Although analysts don't expect the court to block the fund, it could call for more limits and conditions so that the German parliament has a say on future aid.
The Federal Reserve meeting takes place Wednesday and Thursday. The German court is expected to rule on Wednesday.
"Overall, there's a bit of a pause ahead of the German court decision and the Federal Reserve," said John Kilduff, a trader with Again Capital.
The coming days will also see the release of reports by the U.S. Energy Information Administration and the International Energy Agency on the outlook for oil and energy markets. On Tuesday, the Organization of Petroleum Exporting Countries maintained its oil growth outlook for 2012 but said "downside risk exists as the economic slowdown in the developed countries could increasingly spill over into the non-OECD."
Some analysts think a move by the Federal Reserve to undertake another round of easing might not have much impact because it is already priced into oil.
Action from the Fed "has likely been discounted (and a) 'buy the rumor sell the news' scenario could easily unfold across the petroleum complex this week as was the case with last week's ECB release," said Jim Ritterbusch, head of trading advisory Ritterbusch and Associates.
