Oil stays near 8-day high on U.S. economy
31 August, 2010
SINGAPORE: Oil stayed near an eight-day high above $75 on Monday as sustained momentum from Federal Reserve Chairman Ben Bernanke`s speech last week boosted Asian stock markets.
Japanese shares jumped more than 3 percent while the yen fell as the Bank of Japan held an emergency meeting to curb a rise in the Japanese currency that threatens a fragile economic recovery.
Oil prices also received support from increased hurricane activity in the Atlantic Ocean, with storms expected to follow paths closer to the United States.
U.S. crude for October CLc1 rose 3 cents to $75.20 a barrel by 0352 GMT, having earlier approached Friday`s peak at $75.59, the highest intraday price since Aug. 19. ICE Brent for October LCOc1 rose 2 cents to $76.67.
Oil gained 2.5 percent on Friday following a speech by Bernanke that calmed fears of a double-dip recession. Prices earlier in the week had dropped to an 11-week intra-day low of $70.76.
"The stock markets in Asia are very good at the moment, and that`s supportive for the crude oil market," said Ken Hasegawa, a commodity derivatives manager at brokerage Newedge in Japan.
"For the next two months, hurricane information will also be supportive, and if there is a supply disruption, then the price goes to $80."
Other commodities also extended sharp gains on Friday, lifted by a downward revision to U.S. growth that was not as severe as anticipated.
U.S. gross domestic product growth for the second quarter was revised down to only 1.6 percent, from 2.4 percent, the Commerce Department said on Friday.
Many economists had forecast an even bigger downward revision to 1.4 percent growth, compared with 3.7 percent in the first quarter. But most still do not believe the economy will slide back into recession and say the most likely prospect is for continued slow expansion.
In remarks prepared for delivery at a Fed conference, Fed Chairman Bernanke said the central bank was ready to take further steps if needed to spur the stumbling economy.
"Stimulus would be good support for this market, but there is still no power to move prices to $85 or $90," Hasegawa said.
Hurricane Earl was expected to sweep past the Virgin Islands and Puerto Rico as a major hurricane on Monday, before turning towards the northwest to weaken and approach the mid-Atlantic U.S. coast, the National Hurricane Centre (NHC) said in its latest advisory.
On the heels of Earl, an area of low pressure in the central Atlantic Ocean had an 80 percent chance of becoming a tropical cyclone in the next 48 hours, according to the NHC. It was still too early to determine whether this system would take a similar track to hurricanes Danielle and Earl, forecast to stay well away from the oil-rich Gulf of Mexico.
Money managers cut net long crude oil positions on the New York Mercantile Exchange to 73,475 in the week through Aug. 24, the Commodity Futures Trading Commission said on Friday, from 108,874 in the week to Aug. 17.