Oil rises above $85 after Fed bond buying decision
Thursday, November 4, 2010; 2:16 AM
BANGKOK -- Oil jumped above $85 a barrel in Asia on Thursday as the dollar weakened slightly following the U.S. Federal Reserve's announcement it will buy $600 billion dollars of Treasurys to stimulate the U.S. economy.
Benchmark crude for December delivery was up 63 cents at $85.32 a barrel at early afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract rose 79 cents to close at $84.62 a barrel on Wednesday.
The announcement wasn't a surprise for markets but it underlined expectations that the dollar could weaken further and push up prices for commodities including oil. Since crude is priced in dollars, a weaker dollar makes it more attractive to buyers using foreign currencies.
Speculation about what the Fed would do has captivated energy traders for weeks. Now that it has been announced, the focus may shift to such basics as supply and demand. Oil and gas supplies are ample and demand is weak.
"It's really going to come down to how the economy seems to play out, I think, especially as we go through the holiday shopping season to see if consumers are more willing to spend this year," said Tradition Energy analyst Gene McGillian.
In its weekly report, the Energy Department said crude inventories increased by 2 million barrels to 368.2 million barrels for the week ending Oct. 29. The total was 9.6 percent more than the year-ago level and remained at the upper limit of the average range for this time of year.
In other Nymex trading in December contracts, heating oil added 1 cent to $2.34 a gallon, gasoline gained 3 cents to $2.14 a gallon and natural gas rose 1 cent to $3.84 per 1,000 cubic feet.
In London, Brent crude rose 53 cents to $86.91 a barrel on the ICE Futures exchange.