Oil advanced for a third day as U.S. payrolls increased less than expected in August, raising speculation that the Federal Reserve will boost stimulus measures to spur economic growth.
Prices gained 0.9 percent after the Labor Department reported the economy added 96,000 workers last month, less than the 130,000 median estimate in a Bloomberg survey of economists. The Federal Open Market Committee will meet Sept. 12-13 to discuss monetary policy.
“More than anything I think attention is focused on the employment numbers this morning, which were really bad,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “They made it easier for the FOMC to make some moves for stimulus when they meet next week. We may see some volatile days before they make their announcement Thursday.”
Crude for October delivery rose 89 cents to $96.42 a barrel on the New York Mercantile Exchange, the highest settlement in a week. Futures dropped 5 cents this week and are down 2.4 percent this year. They have advanced 24 percent from the year’s low of $77.69 a barrel on June 28.
Brent oil for October settlement increased 76 cents, or 0.8 percent, to end the session at $114.25 a barrel on the London-based ICE Futures Europe exchange.
The lower-than-forecast employment growth will move the Fed closer to more quantitative easing, Pacific Investment Management Co.’s Bill Gross said. The Fed implemented two rounds of large-scale asset purchases totaling $2.3 trillion from December 2008 to June 2011.
Policy makers will give “strong hints” or provide “positive action” at the FOMC meeting, Gross, who runs the world’s biggest bond fund, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
Fed Chairman Ben S. Bernanke said on Aug. 31 that he wouldn’t rule out more stimulus to boost the economy. The European Central Bank agreed yesterday to an unlimited bond-purchase program.
“The odds of more stimulus measures are going up after the jobs report,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “The Fed may join the ECB in more bond buying to try to stimulate the economy, and that’s kind of pushing oil higher.”
Last month’s payroll growth followed a revised 141,000 rise in July that was smaller than initially estimated, the Labor Department figures said.
“That’s about as bad as you can get,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “But people are thinking that the stimulus measures will get stronger.”
The unemployment rate unexpectedly fell to 8.1 percent in August as the share of the working-age population in the labor force slumped to the lowest level since 1981. The participation rate decreased to 63.5 percent from 63.7 percent.
Oil also advanced as the euro gained as much as 1.4 percent against the dollar on the Fed stimulus speculation. The currency rose to $1.2806, the highest level since May. A stronger euro and weaker dollar boost oil’s appeal as an investment alternative.
Crude fell as much as 1.5 percent earlier on speculation that the White House is considering tapping the Strategic Petroleum Reserve.
A release may be more likely should Brent reach $120 a barrel, said a person with direct knowledge of a meeting yesterday that Obama administration officials held with outside crude-market experts. The administration hasn’t made a decision on whether to release oil from the reserve, and there was no discussion of any deadline for a decision, the person said.
“The odds of an SPR release are increasing,” said Stephen Schork, president of the Schork Group Inc. in Villanova, Pennsylvania. “The administration really has to do something to deflect what they are seeing now.”
The Obama administration is continuing to look at all its options to make sure high oil prices don’t crimp the global economy, Jay Carney, the White House press secretary, said Aug. 30 in response to a question at a briefing.
Electronic trading volume on the Nymex was 493,147 contracts as of 3:43 p.m. in New York. Volume totaled 710,388 contracts yesterday, 32 percent above the three-month average and the highest level since Aug. 15. Open interest was 1.56 million.