Oil prices hit another two-year pinnacle

6th December 2010, Comments 0 comments

World oil prices surged Monday to a new two-year peak, propelled by a raft of positive investor sentiment after the US Federal Reserve signalled more monetary easing could be on the way.

In morning London deals, Brent North Sea crude for delivery in January soared to 92.03 dollars per barrel, which was the best level since October 2008. It later stood at 91.41, down one cent from Friday's closing level.

And New York's main contract, light sweet crude for January, hit a similar peak at 89.76 dollars, before pulling back to 89.17, down two cents from Friday.

"Commodity prices are leaping from one high to the next," said Commerzbank analyst Carsten Fritsch, citing various supportive factors.

"The US Fed's determination to fight economic weakness through huge expansion of the monetary base, general market optimism ... and 'window-dressing' by investment funds towards year-end ... are all factors contributing to the price rally."

Fed Chairman Ben Bernanke hinted over the weekend that the US central bank could ramp up its so-called quantitative easing policy.

More Fed action to combat unemployment is "certainly possible," Bernanke said in an interview on Sunday.

Bernanke was asked on CBS television if the Fed might inject more than the 600 billion dollars planned for the November-to-June time frame.

"It's certainly possible," he said.

"It depends on the efficacy of the program. It depends, on inflation. And finally it depends on how the economy looks," Bernanke added.

The Fed recently decided to pump an extra 600 billion dollars into the financial system, via the purchasing of US Treasury securities and other assets, as a means of galvanising the flagging US economy.

Crude futures surged Friday as traders largely ignored disappointing US employment numbers in favour of a slumping US dollar.

A weak greenback makes dollar-traded commodities more attractive for investors.

Oil markets have also been cheered by strong energy demand, after a cold snap in Europe that is only just beginning to ease.

© 2010 AFP

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