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Oil Rises to Four-Month High on Stimulus, Middle East

By on September 14, 2012

Oil Prices

Oil rose to the highest level in four months on speculation that economic stimulus in the U.S. will boost fuel demand. Concern that unrest in the Middle East and North Africa will disrupt supplies also buoyed prices.

Futures advanced as much as 1.2 percent, erasing their decline for the year. The Fed said yesterday it will make open- ended purchases of $40 billion a month of mortgage debt to boost the economy. Protesters attempted to storm the U.S. embassy in Yemen, and demonstrators marched in Egypt and Iran against a film seen as insulting to Islam. Iran is raising tension by expanding its nuclear program, according to Robert Wood, the U.S. envoy to the International Atomic Energy Agency.

“We always have initial optimism on stimulus programs — the question is, how long it will last?” said Jonathan Barratt, the chief executive officer of Barratt’s Bulletin, a commodity newsletter in Sydney. “Middle East geopolitical concerns should add a premium of about $5 to $6.”

Crude for October delivery climbed as much as $1.15 to $99.46 a barrel in electronic trading on the New York Mercantile Exchange and was at $99.28 at 1:32 p.m. Singapore time. The contract yesterday increased 1.3 percent to $98.31, the highest close since May 4. Prices are up 3 percent this week, set for the sixth gain in seven weeks, and 0.5 percent this year.

Brent oil for November settlement on the London-based ICE Futures Europe exchange rose as much as 84 cents, or 0.7 percent, to $116.72 a barrel. The October contract, which expired yesterday, gained 94 cents to close at $116.90. The front-month price for the European benchmark crude was at a $17.06 premium to New York-traded West Texas Intermediate grade.

Demonstrations

The Fed said it will continue buying assets and employ other policy tools as appropriate “if the outlook for the labor market does not improve substantially.”

Demonstrators in the Yemeni capital, Sana’a, breached the U.S. embassy compound’s security perimeter and set two cars ablaze yesterday, according to Yousef Al-Ahjan, who joined the rally. One protester was killed and five injured, Al Arabiya television said.

At least 216 people in Egypt were injured in a third day of clashes near the U.S. embassy in Cairo, said Ahmed el-Ansari, vice-president of the Egyptian Ambulance Organization. There were also demonstrations outside the Swiss mission in Tehran, which represents U.S. interests in Iran.

The violence in the Middle East and North Africa, which hold more than half of the world’s oil reserves, was prompted by extracts of a film that portrays Muhammad. For Muslims, any depiction of the prophet is sacrilegious. The unrest also follows the killing of the U.S. ambassador to Libya, Chris Stevens, and three officials during an attack on consular buildings in Benghazi on Sept. 11. U.S. lawmakers said groups tied to al-Qaeda may have been involved.

 

Source: Bloomberg