Crude oil futures hit two year highs today, still riding the wave of optimism created by the Federal Reserve’s announcement of a fresh round of stimulus.
The Fed was widely expected to unveil a new round of quantitative easing, though it was not clear what the size of the new asset purchase programme was going to be. The consensus forecast seemed to be US$500 billion over six months.
Investors shied away from putting money into riskier assets, held back by a report in the Wall Street Journal, which suggested that the Fed may opt for a smaller package, limiting it to a few hundred billion over a few months to minimize policy risks.
Yet the Fed decided to buy US$600 billion worth of Treasuries to spur the apparently slowing recovery.
The move triggered a buying spree in commodity markets, while pushing the US dollar to 11 month lows against a basket of other major currencies.
Weakness in the US dollar provided further support for oil prices, making crude oil cheaper for holders of other currencies to lift demand.
The American currency rebounded later in the day on demand from bargain hunters, trimming gains in oil futures.
US light, sweet crude for December delivery improved to US$86.61/barrel, while January crude reached US$87.28/barrel on the New York Mercantile Exchange (NYMEX).
On the ICE Exchange, December Brent Crude stood at US$88.04/barrel, while Brent for January delivery last traded at US$88.21/barrel.
BP (LON:BP) posted a small gain, while fellow supermajor Shell (LON:RDSB) declined marginally, as did BG Group (LON:BG) and Cairn Energy (LON:CNE).
Tullow Oil (LON:TLW) held steady.
Amec (LON:AMEC) climbed 1%. Another oil and gas engineering firm Petrofac (LON:PFC) stood just above the opening level.
Midcaps were mixed. Heritage Oil (LON:HOIL) led the group with a 1.6% gain. Premier Oil (LON:PMO) and Salamander Energy (LON:SMDR) added less than 1%.
JKX Oil & Gas (LON:JKX) and Melrose Resources (LON:MRS) moved in the opposite direction, shedding nearly 2%. Dragon Oil (LON:DGO) and Soco International (LON:SIA) declined marginally.
Services companies Wood Group (LON:WG) and Wellstream Holdings (LON:WSM) tacked on nearly 1%.
North Sea oilfield developer Xcite Energy (LON:XEL) and Mongolia focused oil explorer Petro Matad (LON:MATD) were among the top performing small caps, surging 15.5% and 14% respectively.