Oil nears 5-month high

Thursday, 7 October 2010 23:04 - - {{hitsCtrl.values.hits}}

Singapore-(Reuters): Oil rose on Thursday to within a dollar of five-month peaks, supported by expectations that central banks will ease monetary policy to shore up sluggish economies and falling US fuel stockpiles.

November US crude rose 26 cents to $83.49 a barrel at 0423 GMT. ICE Brent added 26 cents to $85.32.

The prospect of a second round of expansionary monetary policy, known nowadays as quantitative easing stage two, or QE2, hangs upon key US employment reports, with weekly statistics due on Thursday and more comprehensive monthly data on Friday.

‘Whatever the data is, the market may continue to go to the upper side until early November,’ said Ken Hasegawa, a commodity derivatives manager at Japan’s Newedge brokerage, referring to the Fed’s next policy-setting meeting on Nov. 2-3.

‘It’s not easy to develop a short position at the moment because the trend is higher.’ A negative jobs reading on Friday could reassure investors the US Federal Reserve will take action to reinvigorate the economic recovery, Hasegawa said.

Private employers in the US cut 39,000 jobs in September, the largest monthly loss since January, ADP employment data showed on Wednesday, compared with forecasts for a rise of 24,000 jobs. The ADP private report is sometimes seen as a preliminary indication for the monthly government figures.

A sinking greenback on Wednesday, linked to the expected inflow of fresh dollars into the US economy, helped send front-month US crude to an intra-day peak of $84.09 a barrel, the highest price since May 4.