Oil rose for a fourth straight day today, trading near six-month highs, as the dollar weakened after the US Federal Reserve unveiled a plan to buy debt and pump more money into the economy.
US crude for December rose 61 cents to $85.30 a barrel earlier this morning after touching $85.36 yesterday, the highest intraday price since May 4th. ICE Brent for December gained 56 cents to $86.94.
The US central bank yesterday said it would buy around $75 billion in Treasury bonds per month through mid-2011, totalling around $600 billion. The dollar weakened about 0.2 per cent today against a basket of currencies.
Wide anticipation of the Fed stimulus measures - meant to avert deflation and create jobs by easing long-term borrowing costs - boosted the price of oil from mostly within a range of $72-$80 in September to $80 and above in October and November.
"After the Fed meeting, a trend of weakness in the dollar will continue, so oil can still move to the upside," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage.
The Fed's plans are in line with consensus expectations, but are less aggressive than some polled by Reuters had anticipated. Estimates for overall Fed asset purchases ranged from $250 billion to $2 trillion.
Following the Fed's announcement, commodities investors may return to closer scrutiny of the fundamentals of oil supply and demand and broad economic indicators, analysts said.
US stocks of petrol fell by 2.7 million barrels, while distillate fuels, including heating oil and diesel, slid by 3.6 million barrels as the country's refineries cut utilisation rates to the lowest since March, the Energy Information Administration reported yesterday.
The US services sector grew more quickly than expected in October and factory orders posted their largest gain in eight months. Also, a report showed US private employers added more jobs than expected in October.
More evidence about the state of the US economy, which would affect future demand, will arrive today, with weekly jobless claims data, and tomorrow, with monthly payrolls data and the unemployment rate from the Labor Department.
Reuters