Oil climbed in New York on speculation that central banks will be taking increased measures to boost economic growth – in turn generating demand for raw materials.
European Central Bank President Mario Draghi has stated that he will do “whatever it takes” to save the euro, presenting details of a new bond-buying plan that has market players hopeful that it can ease the eurozone crisis. European leaders met in Rome and Berlin on Tuesday, two days before the European Central Bank (ECB) holds its policy meeting.
“The ECB will obtain a broader mandate over time,” said Hakan Kocayusufpasaoglu, chief investment officer at Archbridge Capital in an interview with Bloomberg. “All commodity-related assets, and especially the ones with tight supply-demand balances will rally” as a result of central bank action.
Crude for October delivery was recorded at $97.37 — a gain of 90 cents — in electronic trading on the New York Mercantile Exchange on Tuesday, the highest intraday price since August 27. Brent oil for October settlement rose 44 cents to $116.22 a barrel on the London-based ICE Futures Europe exchange, according to Bloomberg data.
The U.S. Energy Department report will be released a day late this week because of the Labor Day holiday. The holiday marked the end of the U.S. summer driving season, the peak demand period for gasoline.
According to the latest report from the U.S. Bureau of Safety and Environmental Enforcement, approximately 58 percent of oil output and 39 percent of natural-gas production from the Gulf of Mexico remains shut in because of Hurricane Isaac. Daily crude capacity was cut by as much as 95 percent last week as Isaac moved through the Gulf.
Analysts said the market was in a bullish mood ahead of a ECB meeting on Thursday, as well as a two-day gathering of U.S. Federal Reserve policymakers next week.
“The main driver at the moment is the expectation around an ECB announcement on Thursday – investors are looking for some indications of more bond buying,” Filip Petersson, Commodity Strategist at SEB Commodity Research told Reuters.
“They are also looking to see if the U.S. non-farm payrolls on Friday will be bad enough to keep the door open for QE3.”
The release of U.S. non-farm payrolls for August, a closely watched gauge of employment in the world’s largest economy, could impact prices, according to oil analyst Stephen Schork.
He attributed recent fluctuations in the oil price to the conflicting influences of a lower dollar and refinery disruptions in the U.S. Gulf Coast as a result of Hurricane Isaac.