Oil tops $82 ahead of Bernanke speech as dollar weakens
Technicals show prices to rise to $84.
October 25, 2010 10:43 by Reuters
Oil rose past $82 on Monday as the dollar weakened ahead of a speech by Federal Reserve Chairman Ben Bernanke, where he may outline details of an expected new round of U.S. monetary stimulus.
U.S. crude for December rose 73 cents to $82.42 a barrel at 0240 GMT, about $2 from a five-month high of $84.43 reached on Oct. 7. ICE Brent added 59 cents to $83.55.
Investors will look for clues about how much Treasury bonds the U.S. central bank is likely to buy in a highly anticipated move to pump more money to shore up a faltering economy. Bernanke will make his speech at 1230 GMT after G20 finance ministers over the weekend agreed to shun competitive currency devaluations.
Bernanke “has been quite dovish, giving justification for more debt purchases,” said Michelle Kwek, an analyst at Informa Global Markets in Singapore, as part of an expansionary monetary policy known as quantitative easing, or QE.
“People are still focused on QE and the fact that they are going to be printing more money.”
At a meeting in South Korea over the weekend, G20 finance ministers recognised the quickening shift in economic power away from Western industrial nations by striking a surprise deal to give emerging nations a bigger voice in the International Monetary Fund.
Countries like the United States are betting that with greater representation emerging economies such as China will be more willing to address the trade distortions causing currency volatility and threatening increased protectionism.
SELL THE DOLLAR
“People are still selling dollars after the G20 meeting and that is putting upside pressure on commodities,” Kwek said.
The G20’s “statement was to move more towards market exchange rates that reflect economic conditions, so this favours the appreciation of Asian currencies.”
The dollar weakened about 0.6 percent against a basket of currencies on Monday after the G20 accord to keep a status quo trade of selling the U.S. currency and buying equities and commodities such as gold. A weaker dollar renders oil imports cheaper for buyers in Asia, where demand is growing at the fastest pace.
World stocks and the dollar see-sawed on Friday before the G20 agreement. On Monday, buying of Asia ex-Japan equities was spread out across the sectors, though resource-related shares had a slight edge.
French President Nicolas Sarkozy scored a victory on Friday by getting his bill to make people work two more years for their pensions through the Senate, but striking refinery workers are putting a strain on businesses and daily life and show no sign of backing down.
Workers at two refineries have voted to stay on strike this week, and workers at the other plants will meet in the days ahead to decide their course of action.
Hurricane Richard strengthened as it bore down on the Central American nation of Belize, where tourists were evacuated from hotels and some residents fled to government shelters.
The storm was seen making landfall near Belize City late on Sunday before weakening to a tropical depression and entering Mexico’s Bay of Campeche, where Mexico produces more than two-thirds of its 2.6 million barrels-per-day of crude output.
Mexico’s state oil company, Pemex, said it was watching the storm but had not evacuated any workers from its offshore platforms. The storm would likely not strengthen again once it entered the Gulf, the National Hurricane Center said.
(Editing by Manash Goswami)