Oil rises to $87 ahead of Fed statement

October, 30th 2014

London: Brent crude oil rose to $87 (Dh319) a barrel on Wednesday as traders anticipated that the Federal Reserve would keep US interest rates low, putting pressure on the dollar.

The Fed is widely expected to end its two-year-old bond-buying stimulus programme, but to reiterate a cautious stance on raising rates, when it issues a statement at 1800 GMT.

“We’re likely to see a slightly weaker dollar today, if the Fed is as dovish as expected, and that will support oil prices in the short term,” said Michael Hewson, chief analyst at CMC Markets in London.

A weaker greenback makes it easier for global consumers to buy dollar-denominated commodities such as oil, boosting demand.

Brent crude for December was up 95 cents at $86.98 a barrel by 1125 GMT, after touching a high above $87. Front-month US crude was up 75 cents at $82.17 a barrel.

Prices also gained support from buoyant stock markets in Europe and Asia, after US stocks ended more than 1 per cent higher on Tuesday.

US consumer confidence rose in October to its highest since October 2007 as views on the job market improved, according to a private-sector report released on Tuesday.

Opec Secretary General Abdullah Al Badri said on Wednesday that the cartel does not have a price target and that there is no need to panic at falling prices.

“The fundamentals do not reflect this low price,” Badri said at the annual Oil & Money conference in London.

Production target

He also predicted that US tight oil production would slow, and that Opec should be ready to produce 40 million barrels per day (bpd) of crude by 2020.

Opec now has a production target of 30 million bpd and Badri suggested last month that this should be cut to around 29.5 million bpd.

US stocks of gasoline and distillates fell by 3.7 million barrels and 3 million barrels respectively, three times more than analysts’ expectations, data from industry group American Petroleum Institute (API) showed on Tuesday.

US crude inventories rose 3.2 million barrels last week, slightly below analysts’ expectation of a 3.4-million-barrel increase.

Crude inventories have risen for the past three weeks, typical in the approach to winter, when demand increases.

US oil refining capacity is forecast to increase this week due to a reduction in planned outages as the maintenance season draws to a close, data from research company IIR showed.

Investors awaited data on oil stocks from the US government’s Energy Information Administration at 1430 GMT.

Several major banks have cut their price forecasts for Brent and US crude next year in the past two weeks, but weeks of losses have brought prices into the range of these revised forecasts.

Source: Gulfnews.com