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Oil climbs on QE3 speculation, inventories data

Last updated: 11:06 07 Jun 2012 BST, First published: 15:06 07 Jun 2012 BST

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Oil prices surged today in tandem with global equity markets as demand for riskier assets was boosted by expectations of stimulus action by the European Central Bank (ECB) and the Federal Reserve.

Futures for crude oil received more support from Tuesday’s report from the American Petroleum Institute (API) said yesterday that inventories shed 1.8 million barrels last week, falling to 384.1 million barrels.

Today’s more closely watched figures from the Department of Energy may show a drop of 0.5 million barrels.

The ECB left its interest rate unchanged at one percent today with president Mario Draghi saying that a few, but not many members favours a rate cut.

He said downside risks to the euro zone had increased and the bank was prepared to act to shore up the economy, however, he indicated there were no plans for another long-term refinancing operation (LTRO).

It has also been speculated that the Federal Reserve could consider launching another round of quantitative easing after last week’s key non-farm payrolls data undershot even the most pessimistic forecasts.

The data released by the Department of Labor last Friday revealed that the economy added only 69,000 jobs in May compared with expectations of a gain of 150,000.

In addition, the Commerce Department revised its first quarter growth estimate for the US GDP down to 1.9 percent from 2.2 percent previously.

Traders are now looking to tomorrow’s speech to the Congress by Ben Bernanke to see how the Fed chairman responds to last week’s downbeat economic data.

US light, sweet crude for July delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), rose US$1.78 to US$86.07/barrel in morning trade in New York.

July Brent crude surged US$2.18 to US$101.02/barrel on the ICE Exchange this afternoon.

Today’s top risers in the oil and gas sector were:

Amerisur Resources (LON:AMER), up 22 percent at 25 pence at midday

Coastal Energy (LON:CEO), up 8 percent at 964 pence

Bahamas Petroleum (LON:BPC), up 7.5 percent at 7.3 pence

Dragon Oil (LON:DGO), up 7.5 percent at 520 pence

Premier Oil (LON:PMO), up 6.5 percent at 350.7 pence

The top fallers were:

Regal Petroleum (LON:RPT), down 11.5 percent at 19.5 pence at midday

Bluebird Energy (LON:BBE), down 8 percent at 0.85 pence

Silvermere Energy (LON:SLME), down 8 percent at 11.5 pence

Urals Energy (LON:URA), down 7.5 percent at 6.26 pence

 

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