Oil rose for a second day in New York on speculation that Federal Reserve plans to keep U.S. interest rates near a record low will bolster investor demand for commodities.
Futures advanced as much as 0.9 percent after the Fed’s announcement sent the dollar to its lowest in more than a month against the euro. A weaker U.S. currency makes commodities more attractive as protection against inflation. The Federal Open Market Committee said it expects its benchmark interest rate to stay at “exceptionally low levels” at least through late 2014. A wider ban on Iranian exports than that announced by the European Union this week could boost oil by $30 a barrel, the International Monetary Fund said.
“It’s a big commitment from the central bank,” said Sintje Boie, who correctly predicted in November that oil prices would slide by year-end. “For the markets, it’s a liquidity thing. All this liquidity must go somewhere, and so we have some money also going into oil. Prices are higher because of this bubble of liquidity.”
Crude for March delivery rose as much as 84 cents to $100.24 a barrel on the New York Mercantile Exchange and was at $100.01 at 9:48 a.m. London time. The contract rose 45 cents to $99.40 yesterday. Prices are up 15 percent in the past year.
Brent oil for March settlement was up 91 cents, or 0.8 percent, at $110.72 a barrel on the ICE Futures Europe exchange in London. The European contract’s premium to Nymex crude was $10.71 a barrel. That’s down from a record $27.88 on Oct. 14.
Near-Zero Rates
The Fed had previously pledged to extend near-zero interest rates through mid-2013. Chairman Ben S. Bernanke also said the central bank is considering additional asset purchases to improve economic growth. The dollar was little changed at $1.3114 per euro as of 9:21 a.m. in London after earlier reaching $1.3134, the lowest since Dec. 21.
“We’re getting a bit of a rally on expectations that the Fed will be accommodative,” said Jeremy Friesen, a commodity strategist at Societe Generale SA in Hong Kong who predicts oil to remain “rangebound” at about $100 a barrel in the coming months. “Once people focus again on the euro zone and slow growth we’re expecting in the first half of this year, you’ll see a bit of a correction in the rally.”
U.S. Inventories
Talks on a debt swap to avert a Greek default resume today as international policy makers squabble over the mounting cost of the rescue. European finance ministers have insisted bondholders take bigger losses on their Greek debt.
U.S. crude stockpiles rose 3.56 million barrels last week to 334.8 million, the highest level since the week ended Dec. 2, according to the Energy Department report yesterday. Imports advanced 7.1 percent to 8.85 million barrels a day for the fourth increase in five weeks. Fuel consumption climbed 7.5 percent to 19.2 million barrels a day, the largest increase since Nov. 4, the data showed.
Gasoline inventories fell 390,000 barrels to 227.1 million in the seven days ended Jan. 20, the first decline in four weeks, the report showed. Supplies were forecast to climb by 2 million barrels, the median estimate in a Bloomberg survey.
