Oil Rises on Speculation Central Banks to Boost Stimulus
Oil rose on speculation that central banks will take steps to bolster global economic growth as investors await Greek elections this weekend.
Futures climbed a second day as policy makers from the U.K. to Japan and Canada stepped up warnings about the threat to financial markets should Europe fail to contain its debt crisis. The Greek vote June 17 may determine whether the country remains in the euro bloc. The Federal Reserve starts a two-day meeting June 19.
“It is looking increasingly likely that central banks will take action and increase stimulus,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The Fed has a lot of cover for stimulus and might not even wait for the meeting next week.”
Crude for July delivery rose 12 cents to $84.03 a barrel on the New York Mercantile Exchange. The contract climbed to $84.80 earlier. Prices dropped 7 cents this week. They have dropped 24 percent from the year’s high of $110.55 a barrel on March 1.
Brent oil for August settlement gained 44 cents, or 0.5 percent, to end the session at $97.61 a barrel on the London- based ICE Futures Europe exchange.
The Bank of England said it will provide billions of pounds of emergency aid to U.K. lenders. The central bank will allow the lenders to swap assets for money they can loan to companies and households.
Greeks will vote for the second time in six weeks after a May 6 ballot failed to yield a government. The final polls, published on June 1, showed no party set to win a majority. Exit polls will be released when voting ends at 7 p.m. June 17 in Athens, with a first official result estimate due around 9:30 p.m.
“Greece is holding the global economy hostage,” Flynn said. “The markets have been betting that the anti-austerity forces will lose, which would boost oil prices. If they win, there will be a deflationary downdraft that will impact all markets.”
European Union leaders will press for new efforts to boost the area’s economy and improve lending conditions, according to a draft document prepared for a June 28-29 summit in Brussels.
The Standard & Poor’s 500 Index and the Dow Jones Industrial Average each increased 0.7 percent.
Futures retreated from the day’s highs after industrial production in the U.S. unexpectedly fell in May for the second time in three months and confidence among American consumers declined in June to the lowest level this year.
Output at factories, mines and utilities decreased 0.1 percent last month after a revised 1 percent gain in April, the Federal Reserve reported today in Washington. Economists forecast a 0.1 percent advance, according to the median of a Bloomberg survey. Manufacturing, which makes up about 75 percent of total production, dropped 0.4 percent last month.
The Thomson Reuters/University of Michigan index of consumer sentiment fell in June to 74.1 from 79.3 the prior month, which was the highest since October 2007. The gauge was projected to fall to 77.5, according to a median forecast of 66 economists surveyed by Bloomberg.
“On the economic front, the numbers are just bad and crude could get down even below the $80 mark,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “People are trying to position themselves for the Greek elections and the Fed meeting.”
OPEC kept its output limit at 30 million barrels a day at a meeting yesterday in Vienna as concern that global growth is shrinking outweighed calls by some members for supply cuts. Increased production from Saudi Arabia, the world’s biggest crude exporter, has been blamed for the drop in prices by members including Iran, whose own exports will probably be curbed by a European Union embargo scheduled to start July 1.
Saudi Arabia will make sure there is enough supply in the global crude market, the kingdom’s oil minister said a day after the meeting.
“The whole idea is that there will not be any shortages in the market,” Ali al-Naimi said in an interview with Bloomberg News today in Vienna. “That has been Saudi Arabia’s policy all along. To manage stability of the oil market, keeping it in balance.”
Electronic trading volume on the Nymex was 421,053 contracts as of 4:02 p.m. Volume totaled 580,242 contracts yesterday, 3.5 percent above the three-month average. Open interest was 1.48 million.
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