Fri, Jan 27, 2012 - Page 5 News List

Oil nears US$100 on Fed move

RECORD-LOW RATES:The US Fed’s decision to keep key interest rates unchanged until 2014 drove the US dollar lower against major currencies, and oil prices higher

AP, Bangkok

Oil yesterday rose to near US$100 a barrel in Asia after the US Federal Reserve said it would keep interest rates at record lows at least until 2014 to help jump-start the world’s biggest economy.

Benchmark crude for March delivery was up US$0.43 at US$99.83 a barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange (NYMEX). The contract rose by US$0.45 to finish at US$99.40 per barrel in New York on Wednesday. At one point it was as high as US$100.40.


Brent crude for March delivery was up US$0.71 at US$110.52 a barrel on the ICE Futures Exchange in London.

The Fed, which has kept its benchmark interest rate near zero for three years, said on Wednesday that it does not plan to raise the rate before late 2014.

That caused the US dollar to turn lower against major currencies, which makes US dollar-priced oil less expensive for holders of other currencies.

“That would mean the US dollar would continue to be cheap versus other currencies, and there is typically an inverse correlation between the value of the dollar and commodity pricing,” said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

“So oil prices are supported by the Federal Reserve statement,” he said.


However, other analysts saw room for oil prices to fall.

Leaving interest rates low would encourage businesses and consumers to borrow money cheaply, boosting the economy and leading to higher oil demand.

However, the Fed also “telegraphed its concern regarding US economic growth ... which is intuitively bearish for oil,” an energy trader and consultant at The Schork Group said.

In other NYMEX trading, heating oil rose US$0.023 to US$3.03 per gallon and gasoline futures gained US$0.01 at US$2.85 per gallon.

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