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Oil up on expectations of US stimulus

Dec 11 2012 07:48
AFP

Singapore - Oil prices rose in Asian trade on Tuesday on expectations of fresh stimulus measures from the Federal Reserve to perk up the struggling US economy, analysts said.

New York's main contract, light sweet crude for delivery in January delivery gained eight cents to $85.64 a barrel in the afternoon and Brent North Sea crude for January advanced a cent to $107.34.

The US central bank's policy-setting Federal Open Market Committee (FOMC) is expected to announce new measures to stimulate the economy at the end of a two-day meeting that starts late Tuesday.

"Tonight the Fed begins a two-day love-in, which could see the announcement of more bond-buying ... which could give markets another leg up this month," a report by IG Markets said.

Stubborn high unemployment in the world's largest economy and oil consumer as well as the looming fiscal cliff give the FOMC every reason to expand its stimulus efforts, analysts said.

Traders are keeping an eye on what the Fed will do as the end approaches of its "Operation Twist" of selling short-term debt to buy longer-term debt.

There are signs policymakers will replace it with more outright bond purchases, or "quantitative easing", aimed at lowering interest rates to encourage businesses to invest and hire.

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commodities  |  markets  |  oil

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