Oil rises as Fed stimulus cheers markets

Thu Sep 13, 2012 4:55pm EDT
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By Robert Gibbons

NEW YORK (Reuters) - Oil rose in robust trading on Thursday, with Brent futures rising a sixth session, after the U.S. Federal Reserve launched another stimulus program in which it will buy $40 billion of mortgage debt per month until the outlook for jobs improves.

Prices seesawed after the Fed statement, initially jumping $1 per barrel and then swinging lower before climbing back into positive territory on expectations the move would encourage investors to push money into riskier assets including commodities and equities, as they have after previous stimulus initiatives.

The Thomson Reuters-Jefferies CRB .CRB commodity index rose 0.55 percent, a sixth straight gain, to touch the highest level since March, while equities markets extended gains.

"The seemingly open-ended purchase of mortgage-backed securities at $40 billion per month gives the markets the QE3 that had been priced in to a great degree," said John Kilduff, partner at Again Capital LLC in New York.

"The Fed's policy moves will likely push oil prices higher, but you must be mindful that the policy considerations are a reaction to underlying conditions that are not favorable to a robust demand environment for oil, at the same time."

Front-month October Brent crude, which expired on Thursday, rose 94 cents to settle at $116.90 a barrel, marking the sixth straight session the global benchmark has traded higher. Prices reached $117.48 during the session, the highest level for Brent since the May 3 peak of $118.45.

The more actively traded November contract gained 55 cents to settle at $115.88 a barrel.

U.S. crude rose $1.30 to settle at $98.31 a barrel, off earlier highs of $98.58, the highest since $102.72 on May 4.   Continued...

Gas pumps are seen at a petrol station in Prague May 10, 2012. REUTERS/David W Cerny