Oil up above $81 in Europe as traders look to possible Fed moves to boost crude. Oil prices edged above $81 a barrel Friday as traders weighed the effects of possible moves by the U.S. Federal Reserve to spur economic growth and as finance ministers meeting in South Korea were expected to discuss currency market tensions.
By early afternoon in Europe, benchmark oil for December delivery was up 57 cents at $81.13 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.98 to settle at $80.56 on Thursday.
Oil has seesawed above $80 this week as investors speculate on possible Fed measures known as quantitative easing, such as buying Treasury bonds to help boost money in circulation and bank lending. The Fed next meets on Nov. 2 and 3.
«This week’s price volatility is likely to continue for another week and a half until the Fed meeting provides some clarity regarding the extent of widely expected quantitative easing,» Ritterbusch and Associates said.
«We look for a sizable easing effort to likely weaken the dollar and bolster equities and enhance oil’s appeal as an inflation hedge or valued asset.»
Crude has been boosted this year by strong demand from emerging economies such as China which has offset sluggish consumption in developed countries. Some analysts expect Chinese demand to continue to grow, despite a surprise interest rate hike earlier this week.
«Contrary to market fears, the health of Chinese oil demand remains extremely robust,» Barclays Capital said.
The correlation between a weaker dollar and higher commodity prices, and vice versa, seemed to have been lost Thursday and Friday, but analysts said the high volatility in currency trading may have been behind the change.
«A number of minor trends, lasting for several hours each, have pushed currency quotes up and down in quick succession,» said a report from Cameron Hanover. «This has been difficult for oil traders — and markets — to follow.»
Ministers from the Group of 20 developed and emerging economies are meeting in Seoul, South Korea, and are expected to discuss tensions in currency markets and how to avoid a battle of competitive devaluations.
On Friday, oil prices were higher despite a strengthening dollar, which made crude more expensive for investors holding other currencies.
The euro fell to $1.3908 on Friday from $1.3933 late Thursday in New York while the British pound was down to $1.5698 from $1.5713.
«In what could be a sign that the end-game may be near … we are seeing sizable price retrenchments whenever the dollar strengthens even modestly, with some commodity complexes like gold, having trouble moving higher even when the dollar is weak,» said a report from MF Global in New York. «We still suspect the prevailing strategy of selling the dollar and buying commodity dips will remain in place, at least until the Fed meeting in early November is out of the way.»
In other Nymex trading in November contracts, heating oil rose 1.11 cents to $2.2441 a gallon and gasoline gained 1.93 cents to $2.0493 a gallon. Natural gas was up 1.4 cents to $3.382 per 1,000 cubic feet.
In London, Brent crude rose 79 cents to $82.62 a barrel on the ICE Futures exchange.
Associated Press