Crude Oil Settles up on Hope of Fed Stimulus
Crude oil futures prices rose 1.6% Thursday, settling near $84 a barrel, amid fresh hopes of a new move by the Federal Reserve to stimulate the U.S. economy.
Oil prices recovered from eight-month lows and day earlier, moving higher in line with equities, after the Labor Department said the U.S. consumer price index fell in May for the first time in two years and that new jobless claims rose for fifth of last six weeks.
Phil Flynn, oil analyst at Price Futures Group, said, taken together, the latest data "seems to be begging for more" economic stimulus moves by the Fed, which he said, would pump up oil prices.
Fed Chairman Ben Bernanke said last week the central bank was "prepared to take action" if the economy deteriorates, given the "subdued" inflation outlook. But he said the Fed was still assessing the situation ahead of next week's policy meeting.
Light, sweet crude oil for July delivery on the New York Mercantile Exchange settled 1.6%, or $1.29 a barrel, higher at $83.91 a barrel, the highest level since Friday.
ICE July Brent crude oil expired down 10 cents at the settlement, at $97.03 a barrel, was 2 cents lower at $97.11 a barrel. That drop marked the fourth straight day that front-month Brent prices settled at the lowest level since January 2011. August Brent settled up 45 cents, at $97.17 a barrel.
Global benchmark crude oil prices were mixed and swinging on either side of unchanged for much of the morning, awaiting developments from the oil output policy meeting of the Organization of Petroleum Exporting Countries.
OPEC formally announced in late trading it was keeping its leaky output ceiling of 30 million barrels a day in place, and said members had made commitments to cut some 1.6 million barrels a day of output to reach that level.
But traders were skeptical that Saudi Arabia, the world's biggest oil exporter, would cut output significantly or swiftly, given the fragile state of the global economy. Saudi Arabia, in recent months, boosted its output sharply to 10 million barrels a day to cover a potential shortfall of Iranian crude due to stricter sanctions and to bring down soaring prices that threatened the global economy.
Saudi Arabia Oil Minister Ali Naimi said ahead of the talks that his country was meeting customer demand for oil and would continue to do so.
The output cap "doesn't necessarily have any bearing on the question of actual production," said Tim Evans, analyst at Citi Futures Perspective. "Whatever language they use in their statement, we'll have to wait for actual data to see how they perform."
Gene McGillian, a broker and analyst at Tradition Energy, said he expects U.S. crude oil prices to hold between $80 and $85 in the near term. "The market is catching its breath after the eight-month lows, but I'm not seeing strong enough signals to see a market bottom," he said. Mr. McGillian said the Greek election results this weekend could determine whether the struggling nation exits the euro and set the course for European and global economies, and thus demand for oil.
Reformulated-gasoline-blendstock futures for July settled 2.10 cents higher at $2.6764 a gallon. July heating oil settled up 1.69 cents, at $2.6278 a gallon.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.