Oil futures crept higher Monday, erasing earlier losses, as investors focused on the prospects for another round of monetary stimulus by the Federal Reserve.
Light, sweet crude for October delivery settled 12 cents, or 0.1%, higher at $96.54 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled 56 cents, or 0.5%, higher at $114.81 a barrel.
Futures edged higher on rising sentiment that the Fed will take additional stimulus measures after a two-day meeting of its policy-making body concludes Thursday. Such measures in the past have tended to lift the price of raw materials like oil.
"The market is saying they will do something," said Fred Rigolini, vice president at Paramount Options, an oil options brokerage, in New York. "They're throwing some small hints out there."
The Federal Reserve is under increasing pressure to act following last week's disappointing monthly jobs report. The Labor Department said the U.S. added just 96,000 jobs last month, well below the gain of 125,000 expected by economists. Unemployment fell to 8.1% from 8.3% as more people left the workforce.
Last month, Fed Chairman Ben Bernanke hinted additional stimulus was on the horizon at a speech in Jackson Hole, Wyo.
Such measures typically boost the price of oil by curbing the dollar. That in turn boosts crude by making the dollar-denominated commodity more expensive for holders of other currencies.
The weak U.S. economy has also curbed demand for oil in the world's biggest consumer of crude. The Energy Information Administration last week said weekly petroleum demand fell 0.9%. High unemployment in the U.S. has meant fewer employed workers driving to work or taking vacations.
Elsewhere, demand is flagging as well. China, the world's second-biggest consumer of crude, Monday reported oil imports fell to a 22-month low last month on weaker demand from refiners. Analysts at Credit Suisse said the fall reflected the country's sensitivity to high oil prices.
"The market was under pressure early on the Chinese data," said Andy Lebow, senior vice president for energy futures at Jefferies Bache.
While market watchers say additional Fed measures are being factored into the price of oil, meaning inaction is likely to send prices falling, Nymex crude could pop to $100 a barrel if the Fed embarks on a full-blown round of quantitative easing, said Tim Evans, analyst at Citi Futures Perspective in New York.
"Firm action could drive a wide range of risk-on trade," Mr. Evans wrote in a note to clients.
Front-month October reformulated gasoline blendstock, or RBOB, settled 0.44 cent, or 0.1%, higher at $3.0240 a gallon. October heating oil settled 1.79 cents, or 0.6%, higher at $3.1668 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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