BD:Oil rises on Fed hopes, US fuel stocks seen falling
LONDON — Oil edged above $109 a barrel on Tuesday on hopes the Federal Reserve’s new head will strike a cautiously optimistic tone on the US economy and on expectations US distillate stocks fell as cold weather boosted heating demand.
Fed chairwoman Janet Yellen testifies to legislators later on Tuesday and, say economists, will want to reinforce the central bank’s determination to halt the money-printing presses later this year while ensuring investors that a rise in interest rates remains a long way off.
Brent crude was up 42c at $109.05 a barrel at 10am GMT, after settling 94c lower. US crude traded up 26c at $100.32, having closed above $100 on Monday for the first time this year.
"If Yellen, as expected, gives a dovish testimony, it will give some assurance to oil markets," said Chee Tat Tan, investment analyst at Phillip Futures in Singapore.
"The greenback would be likely to weaken further, which would help lift demand for crude oil."
The dollar fell to its lowest in almost two weeks on Tuesday. Ms Yellen’s prepared testimony on the Fed’s semiannual monetary policy report will be released later at 1.30pm GMT.
The hearing before the House of Representatives Financial Services Committee starts at 3pm GMT.
Some analysts say investor hopes for the Fed chief’s comments may be running a little too high, and are looking for oil prices to retreat soon afterwards.
"The market may be getting a little bit ahead of itself in terms of what can be expected from Janet Yellen’s testimony," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
"From a technical point of view, sustaining the move past $100 for WTI (West Texas Intermediate) is going to be difficult."
US crude was close to a six-week high, supported by expectations of a drop in distillate inventories last week due to freezing weather across the country.
Distillate stocks, including heating oil and diesel fuel, are expected to drop by 2.3-million barrels in the week to February 7, analysts said in a survey before weekly inventory reports from the American Petroleum Institute (API) and the Energy Information Administration (EIA).
US crude oil inventories, however, are expected to rise by 3-million barrels. The API releases its data at 9.30pm GMT, while the EIA report is out on Wednesday.
Brent’s gains were capped by expectations of a further increase in Libyan output. The North African nation’s current production is about 600,000 barrels a day, up from its average rate in January.
