By Moming Zhou - Sep 11, 2012 5:54 PM GMT+0400
Prices headed for the longest streak of gains since July before a two-day Fed meeting starting tomorrow at which policy makers may announce asset purchases or other plans to boost the economy. Oil also rose as the dollar weakened after Moody’s Investors Service said it may lower the U.S.’s credit rating.
Oil rose for a fifth day on speculation that the Federal Reserve will announce additional measures to stimulate the economy, boosting fuel demand.
“People are anticipating that there will be some stimulus plans, and hopefully the stimulus does what it’s supposed to do and stimulate the economy, which means more oil demand,” saidChris Barber, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts. “The Moody’s announcement points to a weaker dollar, which tends to raise commodity prices.”
Crude for October delivery gained 55 cents, or 0.6 percent, to $97.09 a barrel at 9:51 a.m. on the New York Mercantile Exchange. The five-day gain would be the longest since July 19. Prices are 1.8 percent lower this year.
Brent oil for October settlement rose 9 cents to $114.90 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium narrowed to $17.81, near the 20-day average of $18.16.
Fed Chairman Ben S. Bernanke said on Aug. 31 that he wouldn’t rule out more stimulus to boost the economy. The central bank bought a total of $2.3 trillion in bonds from December 2008 to June 2011 to stimulate the economy in two rounds of asset purchases known as quantitative easing.
German Ruling
The Federal Constitutional Court in Karlsruhe will decide tomorrow whether Germany can participate in the European Stability Mechanism, which offers loans to member states and may buy their bonds to cut borrowing costs.
“People are waiting for the Fed meeting and the German constitutional court decision,” saidGene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Oil’s strengthening is predicated on the idea that more steps will be taken to stimulate the economy.”
The euro gained as much as 0.6 percent against the dollar after Moody’s said it may lower the U.S.’s credit rating from Aaa to Aa1 unless budget negotiations during 2013 lead to a reduction of the percentage of debt to gross domestic product. A stronger euro and weaker dollar increase oil’s appeal as an investment alternative.
Standard & Poor’s downgraded the U.S. on Aug. 5, 2011, and has said political and fiscal risks may lead to another downgrade. Fitch Ratings rates America at AAA with a negative outlook.
Oil also increased as a Bloomberg survey showed U.S. inventories may have dropped last week to the lowest level since March as more than a third of Gulf of Mexico output remained shut 10 days after Hurricane Isaac made landfall.
Stockpiles fell 2.75 million barrels to 354.3 million in the seven days ended Sept. 7, according to the median of nine analyst estimates before an Energy Department report tomorrow. That would leave supplies at the least since March 23.
“A drop in inventories should add bullish support, even though it should just be temporary,” Barber said.
To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net