Singapore - Oil rose for a fourth straight day on Thursday, reaching fresh six-month highs, as the dollar weakened after the US Federal Reserve unveiled a plan to buy debt and pump more money into the economy.
US crude for December rose 68 cents to $85.37 a barrel at 05:07 am, the highest intraday price since May 4. ICE Brent for December gained 67 cents to $87.05, also the highest in six months.
The US central bank on Wednesday said it would buy around $75bn in Treasury bonds per month through mid-2011, totaling around $600bn. The dollar weakened about 0.2% on Thursday against a basket of currencies.
Wide anticipation of the Fed stimulus measures - meant to avert deflation and create jobs by easing long-term borrowing costs - boosted the price of oil from mostly within a range of $72-$80 in September to $80 and above in October and November.
"After the Fed meeting, a trend of weakness in the dollar will continue, so oil can still move to the upside," said Ken Hasegawa, a commodity derivatives manager at Japan's Newedge brokerage.
The Fed's plans are in line with consensus expectations, but are less aggressive than some polled by Reuters had anticipated. Estimates for overall Fed asset purchases ranged from $250bn to $2 trillion.
Following the Fed's announcement, commodities investors may return to closer scrutiny of the fundamentals of oil supply and demand and broad economic indicators, analysts said.
"Some indices of the economy are showing good data recently, and in addition the inventory of oil has been reduced. That is also a good factor to buy," Hasegawa said.
Fuel surplus shrinksUS stocks of gasoline fell by 2.7 million barrels, while distillate fuels, including heating oil and diesel, slid by 3.6 million barrels as the country's refineries cut utilisation rates to the lowest since March, the Energy Information Administration reported on Wednesday.
Although fuel stocks fell, US crude stockpiles rose by 2 million barrels last week, EIA figures showed, leaving a major crude surplus compared to the same period of 2009.
The US services sector grew more quickly than expected in October and factory orders posted their largest gain in eight months. Also, a report showed US private employers added more jobs than expected in October.
More evidence about the state of the US economy, which would affect future demand, will arrive on Thursday, with weekly jobless claims data, and Friday, with monthly payrolls data and the unemployment rate from the Labour Department.
Technical analysis of oil prices, based on trends and charts, shows a bullish target of $87.04 for US crude remains unchanged, as per its wave pattern and a channel technique.
"Oil finally went above $85, and now it may go up to $87 or $88 from a technical point of view as short-covering may be triggered," Hasegawa said.
"From a fundamental perspective, a price of $90 would be too high. There is not so much buying interest at that level and a lot of selling orders would come in."
Asian stocks rose to their highest levels since June 2008 and commodity prices rallied on Thursday after the Fed's new bond-buying programme kept the hunt on for growth and higher yields.
Wednesday's underwhelming financial market response to the Fed's move is unlikely to dismay central bank officials who carefully telegraphed the move to avoid market disruptions.
Analysts said markets had widely priced in the Fed move prior to the announcement, which was for a slightly higher amount than expected with purchases spread out over a longer period than anticipated.
Enbridge shut down one of its major oil pipelines in the US Midwest for the second time in two months to investigate high-pressure alarms, resuming operations in less than a day, the company said on Wednesday.
The 670 000 barrel-per-day pipeline, a main artery for Canadian crude shipments to the US, was turned off as a precaution late on Tuesday and placed back into service on Wednesday afternoon.