Oil prices jump on eve of Fed meeting

9th August 2010, Comments 0 comments

World oil prices rose strongly on Monday, boosted by the weak dollar, rising equities, upbeat economic data and hopes that the Federal Reserve may take steps to boost the US economy this week.

New York's main contract, light sweet crude for delivery in September, leapt one dollar to 81.70 dollars a barrel.

Brent North Sea crude for September rose 1.10 dollars to 81.26 dollars per barrel in afternoon London trade.

Investors looked ahead to Tuesday's Federal Open Market Committee (FOMC) meeting amid speculation that Fed Chairman Ben Bernanke may hint at fresh steps to lift the economy after last week's weak employment data.

"Crude oil prices held strongly above the 81-dollar area, supported by a weakening US dollar and continuing gains in the global equity markets following robust economic data from (the) eurozone and Germany," said Sucden analyst Myrto Sokou in London.

German exports rocketed in June to the highest level since October 2008, official data showed Monday, sparking optimism over the nation's upcoming second-quarter GDP release on Friday.

Exports soared 28.5 percent to 86.5 billion euros in June from the same month a year earlier, according to provisional data released Monday by the Federal Statistics Office, Destatis.

Sokou added Monday that market sentiment was upbeat "amid hopes for an improvement in the global oil demand if the Federal Reserve further eases its monetary policy at Tuesday's meeting".

The Fed's rate-setting FOMC panel will meet Tuesday amid pressure to resume crisis-era spending to restart a stalled recovery.

The 10-member body is expected to keep interest rates at historic lows, but Fed watchers will be looking for any hint of a return to stimulus spending.

After planning to reel in crisis measures, the Labor Department reported on Friday that the US economy shed 131,000 jobs in July, thrusting the Fed's policies back into the spotlight.

The news had sent crude oil prices tumbling on Friday, as traders fretted over the demand outlook in the key energy consuming nation.

The Fed battled the global financial crisis by spending more than one trillion dollars, buying up Treasury bonds, mortgage-backed securities and other financial instruments to lubricate markets.

Ahead of the FOMC meeting, speculation is rife that members could start re-buying assets scheduled to fall off the books.

© 2010 AFP

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