Oil prices soar after Fed stimulus move

November 04, 2010 | 06:00

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Oil prices soared on Wednesday after the US Federal Reserve announced plans to inject an additional $600 billion into the market in an effort to boost the economy.

New York's main contract, light sweet crude for December, surged to $84.69 a barrel, up 79 cents from Tuesday. It had earlier reached $85.36 , its highest level since May.

London's Brent North Sea crude for delivery in December delivery rallied as high as 86.79 dollars, reaching a level last seen on May 4. It later stood at 86.38, up 97 cents from Tuesday's close.

Shortly before the day's trade ended in New York, the Fed's Open Market Committee announced it would inject $600 billion into the economy by the middle of next year to help safeguard the recovery.

Crude prices have also been boosted by the weak dollar, which has been under pressure because another round of QE is expected to dilute the value of the US unit. A weaker greenback tends to boost demand for dollar-priced oil.

The decision "is positive for the crude market. It is weakening the dollar, and it is also showing that they (the Federal Reserve) are trying to stimulate the economy," said analyst Matt Smith of Summit Energy.

Ahead of the Fed decision, the US government's Department of Energy published its weekly snapshot of crude oil inventories, detailing its stockpiles for the week ending October 29.

The DoE said that US crude stockpiles rose by two million barrels to 368.2 million last week. Analysts had forecast a smaller gain of 800,000 barrels.

AFP

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