New Stimulus from Fed Pushes Current Brent Price to $117

The current crude price of Brent moved up, for the seventh consecutive session, towards $117 per barrel on hopes of higher oil demand following the U.S. Federal Reserve’s launch of a strong program to boost the economy.

The crude price per barrel of Brent for delivery in November, which became the latest front-month contract, grew more than a penny to $116.92 after a 94-cent increase during the last session. Brent, which recently reached its highest level in four weeks at $117.48, is on its way to finish the present trading week up by over 2 percent.

Meanwhile, the crude price per barrel of the U.S. benchmark gained $1.29 cents to $99.60 after quickly reaching $99.64, its highest level in four months. It is about to end the trading week at 3 percent higher.

Natalie Rampono, ANZ’s commodity strategist, said that the Fed is planning to buy mortgage-backed securities each month amounting to $40 billion for an open-ended duration which suggests that there will be continuous economic stimulus for an unspecified period.

That is the main reason why oil prices reached their highest levels in four years.

The decision of the Fed to directly tie its QE3 program to the conditions of the economy was an exceptional move that signaled a huge improvement in its efforts to lower unemployment in the United States.

The U.S. currency recently fell to its lowest level in four months versus the euro because of the Fed’s action. Dollar losses may support dollar-priced items, like crude oil, by making them less costly to consumers with other currencies.

The increase in the current crude prices is also caused by the heightening anti-U.S. demonstrations over a film demonstration considered to be blasphemous to Islam.

United States embassies in Egypt and Yemen were attacked by protesters while the U.S. sent warships to Libya where a U.S. ambassador was recently killed in related violence. Iran, Kuwait, Tunisia, Bangladesh, Sudan and Morroco are other countries where protests have taken place.

BarratBulletin’s chief executive, Mr. Jonathan Barratt, said that the premium in the Middle East is beginning to impact the price of oil by adding around $5 to it. The chief executive also said that plenty of rebellious parties will utilize the film as a way to cause more conflict. Because of that, unrest will go on for a while.

A weaker dollar, central bank efforts and geopolitical risks have compensated for pressure caused by increase crude stocks in the U.S.

Crude supplies in the biggest economy of the world moved higher by 1.99 million barrels during the past week, according to the recent statement of the EIA. Analysts surveyed by Reuters had projected an increase of 2.6 million barrels.

By: Chris Termeer