Oil price rise with all eyes on Fed

2nd November 2010, Comments 0 comments

World oil prices firmed on Tuesday in cautious deals before a crucial US Federal Reserve monetary policy meeting, and following supportive data as well as comments from OPEC kingpin Saudi Arabia.

Brent North Sea crude for delivery in December delivery rose 20 cents to 84.82 dollars a barrel in London trade.

New York's main contract, light sweet crude for December, added 41 cents to 83.36 dollars.

International financial markets are on tenterhooks before the US central bank's two-day meeting, which concludes on Wednesday, amid expectations that it could restart stimulus measures known as quantitative easing (QE).

The widely-expected move, dubbed QE2 by traders, has weighed on the dollar in recent weeks and months because new easing measures are expected to dilute the value of the greenback.

"As the US Federal reserve stands by to announce its next round of quantitative easing, this is only likely to push the dollar lower," said analyst Ian Parrett at British consultancy Inenco.

Since June, the European single currency has risen by more than 15 percent in value against the dollar. A weaker US unit tends to boost dollar-priced oil, which becomes cheaper for buyers that use stronger currencies.

"The dollar was still stuck near recent lows and there is little to be expected here until the Fed delivers its November statement," said analyst Andrey Kryuchenkov at Russian financial services firm VTB Capital.

"Naturally, a smaller-than-expected QE2 (package) would dent sentiment and support the dollar, with oil slipping back," he added.

Meanwhile, the oil market continued to draw strength from Saudi Oil Minister Ali al-Nuaimi, who said on Monday that current oil price levels at above 80 dollars a barrel were within a "very comfortable zone".

Kryuchenkov said: "The market got quite excited after fresh comments from the influential al-Nuaimi."

He said: "The minister said that current prices are still favourable to both consumers and producers as long as the 70-to-90 dollar range holds."

Saudi Arabia is the leading producer and exporter within the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world's oil.

Oil was also lifted this week by upbeat industrial data from the US and China, the world's major energy consumers, analysts said.

In the United States, a key industrial survey showed manufacturing unexpectedly picked up steam in October, raising hopes for a strong final quarter that could underpin US economic recovery.

Data showing that Chinese manufacturing activity hit a six-month high point in October, a sign of recovery in the world's second-biggest economy, also boosted sentiment.

© 2010 AFP

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